Martin van Vliet from ING comments: “Today’s GDP figures clearly demonstrate that the Eurozone economy as a whole is in desperate need of macroeconomic stimulus. With policymakers seemingly reluctant to engineer a coordinated pull-back from fiscal austerity, more monetary stimulus and a weaker currency is likely to be needed to put Eurozone back on a path of sustained growth.”
ECB's Coene: Spain needs aid urgently; Rehn: Greek solution shouldn't involve change to principal sum
ECB Governing Council member Luc Coene declared in the European morning that Spain should urgently seek EU aid. European Commissioner for Economic and Monetary Affairs Olli Rehn, who spoke later in the day, assured that the solution to the Greek problem requires a combination of measures, providing the principal amount of its debt does not change.
Belgian newspaper De Standaard published Coene's statements made at an appearance at Ghent University on Thursday, during which he urged Spain to make the bailout request as soon as possible. He also said that without a partial debt write-off, Greece would not be able to solve its problems.
In Spain, Rajoy's government denied rumors circulating on Thursday which suggested that Spain was planing to bypass the EU and ask the IMF directly for a loan.
Regarding the situation in Greece, European Commissioner for Economic and Monetary Affairs Olli Rehn insisted on Thursday that the solution to the distressed country's problems should involve a combination of elements, although he reminded that they should not include any change to the principal amount of its debt.
“There is a strict unanimity on this within the Eurozone," Olli Rehn assured.
Draghi: OMT devised to improve monetary policy transmission in the Eurozone
ECB head Mario Draghi spoke today about the central bank's monetary policy at the opening of the academic year 2012-2013 at the Università Bocconi in Milan. He emphasized the importance of a proper monetary policy transmission in the Eurozone, which means that interest rates established by the central banks should have a “stable relationship” with the cost of bank loans for the private sector.
The president explained that the fragmentation of the Eurozone financial system brought about by the debt crisis “has made difficult the transmission of impulses coming from an accommodative monetary policy through adjustments in interest rates on loans to households and firms by banks.”
That is why the ECB conceived the OMT scheme, which improves the transmission monetary policy as well as functions as a credible tool against a “catastrophe.” Mario Draghi also assured that the scheme would not “lead to a disguised financing of governments”, “compromise the independence of the ECB”, “create excessive risks for Eurozone taxpayers” nor lead to inflation. The president emphasized that even though not activated yet, the OMT's were already having a positive influence by facilitating corporate bond issuance.
Finally, Mario Draghi reminded that “the ECB cannot replace the actions of national governments” which are ultimately responsible for restoring market confidence in the area.
IMF: EU needs to take 'other actions' to help Greece
The International Monetary Fund's debt-reduction target for Greece is non-negotiable, IMF spokesman William Murray said Thursday, adding that the European Union must take "other actions" to ease the country's debt burden. Meanwhile, Europe is opposed to restructuring its Greek debt.
"Critical to us is Greece's debt sustainability. That means that by 2020, we want to see Greece's debt at 120% of its gross domestic product", Murray said. "Clearly there have to be other actions taken to make sure that we reach a sustainable debt position in Greece".
Murray said the IMF has already extended the maturities and lowered the interest rates for some of its loans to Greece, and can't do more. Nevertheless, IMF spokesman said talks with Greece aren't deadlocked.
"We want a real fix, not a short term fix, a quick fix isn't going to work right now".