European Central Bank governing council member Christian Noyer said that Greece could implement the austerity steps it approved this week and that he was optimistic about a plan to draw private sector banks into a new bailout. In an interview in Greek weekly Proto Thema on Saturday, Noyer said the government of Prime Minister George Papandreou needed to reduce spending and chase tax dodgers.
"It's true that there is a huge debt. You cannot service it unless you cut public spending and crack down on tax evasion," Noyer, who is also governor of the French central bank, told the newspaper. "Europe strongly believes in Greece's ability to implement the reforms," he said. Despite violent protests, Greece passed sweeping austerity bills in parliament this week, a precondition for securing a 12 billion euro loan tranche from the EU and IMF needed to avert default.
Noyer said Greece had to privatise state assets, reform its tax system and cut bureaucracy to kick-start its economy, which remains deep in recession for the third year running in 2011. Asked about a French plan to roll over Greek bonds expiring by the end of 2014 as part of a second bailout to Greece, Noyer said he was confident other European banks would adopt it.
"I am optimistic because the plan that is on the table makes Greece's rescue programme more credible," he said. "Almost all the banks and other financial entities which could take part in Greece's bailout would benefit." Noyer also reiterated the ECB's frequently stated view that restructuring Greece's public debt is not an option. "Greece needs external funding. A restructuring is something that is ruled out," he told the paper.