VIENNA: Spain would have to apply for a rescue package before qualifying for inclusion in the European Central Bank’s plan to buy debt of struggling euro zone members, ECB policymaker Ewald Nowotny said.
Nowotny told Austria’s Profil weekly that it was up to individual countries to ensure the ECB’s bond-buying plan helps to overcome the euro zone’s sovereign debt crisis.
“This can be an effective instrument to contain the crisis and stabilize expectations. But politics has to play along so that this instrument can be deployed positively,” he
said in the magazine interview.
“This is the only way to convince markets. If for instance Spain does not slip into the (euro zone) safety net, we cannot help,” said Nowotny, head of the Austrian central bank.
Spain on Friday cleared another hurdle towards seeking external aid to finance its debts by announcing it would present by the end of September a new round of economic reforms, based on recommendations from the European Union.
Senior European sources said the new measures would probably become an economic program which Spain will have to implement in return for receiving support from the euro zone rescue funds and the European Central Bank to lower its borrowing costs.
Spain has accepted a European credit line of up to 100 billion euros to prop up its ailing banks as it seeks to avoid a full-blown bailout which the euro zone would struggle to afford.
However, most analysts and policymakers believe it is only a matter of time before Spain will require more international help to lower its punishing borrowing costs.
Nowotny also questioned the wisdom of awarding equal voting rights to all national central bank governors in the ECB Governing Council, suggesting big countries should have more say.
His comments to Profil at the weekend were published after the head of Germany’s influential Bundesbank was outvoted when the ECB agreed this month to buy bonds of debt-laden euro zone members that sought an international rescue.
“We always seek consensus. There are few cases where that is not the case, and then it can come to a vote. You cannot see as unproblematic that every governor has the same vote,” Nowotny was quoted as saying in the magazine.
Nowotny drew a distinction with the system at the International Monetary Fund, where votes are weighted by countries’ capital contributions.
Nowotny said it was not up to him to change the ECB voting system, which is set by European treaty, but asked his opinion he said: “I think — myself a citizen of a small country — that taking different economic weightings into consideration generally helps stability, especially in economic issues.”
Spain ‘must seek help before ECB buys bonds’
