ECB’s Coeure: Greece will now be dependent on the markets, which will not be easier or more pleasant

Last Thursday’s Eurogroup agreement to help Greece manage its huge debt pile as it exits the bailout program is a “turning point,” European Central Bank board member Benoit Coeure told France’s Le Figaro on Monday.

“Greece can now free itself from European stewardship. The sacrifices made by Greek society, supported by European solidarity, have paid off,” he said.

“For those who have doubts about this solidarity, I would like to point out that Europe provided Greece with funding of 245 billion euros!,” Coeure added, brushing off criticism that the deal reached in Luxembourg does not go far enough to make Greece’s debt sustainable in the long term.

“The measures decided upon by the Eurogroup go in the right direction, because in the medium term they will make Greece’s debt more sustainable and in the long term the ministers declared their willingness to take additional measures should the need arise,” Coeure said. “But let’s not be naive: Greece will move from a dialogue with the European institutions and the IMF to a dialogue with the financial markets, which will be neither easier nor more pleasant. To maximize its chances, the country must continue with its reforms and stick to a prudent budgetary policy.”

Asked whether the Greek crisis could have been dealt with in a different way from the onset, the ECB executive conceded that the reduction of public expenditure was perhaps too drastic at the start of the crisis, contributing to a worsening of the recession.

“We should have been more realistic about the sustainability of Greece’s debt and insisted on competitiveness and combatting rent-seeking from the start, instead of leaving taxpayers and workers to foot the bill for the adjustment,” Coeure told Le Figaro.

“I might add that Europe lacks a budgetary instrument to support social adjustment in crisis countries, which could have prevented dramatic situations – schools without heating and hospitals without medicine – such as we saw in Greece,” he said.