Exclusive: Greece contagion fears unfounded: ECB Nowotny

By Walter Brandimarte

PRINCETON, New Jersey (BestGrowthStock) – Fears that Greece’s debt problems could spread to other euro zone countries are “unfounded” despite a downgrade of Portugal’s credit ratings on Tuesday, European Central Bank Governing Council member Ewald Nowotny said.

Global financial markets slumped after Standard & Poor’s cut the rating on Portugal’s bonds by two notches, warning that the southern European country needs to implement a tougher fiscal adjustment to avoid further downgrades.

Minutes later, S&P cut Greece’s credit ratings into junk territory, making the country’s already high refinancing costs soar.

“Looking at economic fundamentals, especially the debt situations, one has to see that there are clear differences between Greece and other countries of the euro zone,” Nowotny told Reuters after a lecture at Princeton University.

“So, economically, contagion is unfounded,” he added.

Investors are also worried that Greece may not be able to secure financial aid in time to meet a debt deadline on May 19 as disbursement of the funds agreed by euro zone leaders depends on Greece’s agreeing to a program with the International Monetary Fund.

The IMF program will impose a “whole lot of conditionalities” on Greece, which makes its outcome tough to predict, Nowotny said, adding however that he is optimistic the deal will be sealed in time because all the parties involved are aware of the time constraints.

“They all have decided to go along, therefore the timing will be met,” he said.

(Editing by Chizu Nomiyama)

Exclusive: Greece contagion fears unfounded: ECB Nowotny