3 Feb 2010

ECB founder against bailout for Greece

8:19 am on 3 February 2010

A founding member of the European Central Bank, Ottmar Issing, is warning against any financial rescue of Greece.

Finance minister George Papaconstantinou says Greece's huge debts are part of a wider euro zone problem, with Spain and Portugal also struggling. He says a joint euro bond could solve the crisis.

But Dr Issing says Greece must reform its own economy after years of violating rules and cheating on statistics. He told the BBC a bailout would undermine drastic budget cuts planned by the government.

EU rules state that no nation in the euro bloc should have an annual budget deficit which is higher than 3% of its gross domestic product.

Greece's public debt stands at about 300 billion euros ($US419 billion).

The government aims to shrink public debt to 9.1% of overall economic output this year, down from 12.7% last year.

However, the BBC reports many observers are sceptical that the government will be able to pass its budget, which calls for huge cuts in public spending.