ECB's Asmussen: Greek exit manageable but not preferable

BERLIN (Reuters) - European Central Bank policymaker Joerg Asmussen said a Greek exit from the euro zone would be manageable although he would prefer it if the crisis-stricken country remained within the single currency bloc, a newspaper reported on Monday.

"Firstly my clear preference is that Greece should remain in the currency union," Asmussen was quoted as saying in an advance copy of an interview due to appear in Germany's Frankfurter Rundschau on Monday.

"Secondly, it is in Greece's hands to ensure that. Thirdly, a Greek exit would be manageable."

But Asmussen, a member of the ECB's executive board, also warned that a so-called Grexit would not be as orderly as some imagined: "It would be associated with a loss of growth and higher unemployment and it would be very expensive - in Greece, Europe as a whole and even in Germany."

He also said it would be good if the euro zone's permanent bailout mechanism, the European Stability Mechanism (ESM), successor to the European Financial Stability Facility (EFSF), were up and running as soon as possible.

"The ESM is a better instrument for dealing with the crisis than the EFSF," he was quoted as saying.

Germany's Constitutional Court has said it will deliver its ruling on whether the ESM and the fiscal pact are compatible with the German constitution on September 12. Germany cannot legally ratify the two treaties without the go-ahead from the court and the ESM cannot come into effect without German backing.

On euro zone bonds, Asmussen said such common debt was only logical in a full fiscal union and added that they were not crisis management tools.

BOND BUYING PROGRAMME

ECB President Mario Draghi indicated earlier this month that the euro zone's central bank may again start buying government bonds to reduce crippling Spanish and Italian borrowing costs but not before September and only if governments activated the euro zone's bailout funds to join the ECB in buying bonds.

Asmussen said that for the ECB to consider intervening to help a troubled euro zone state, a government must request aid from the bloc's bailout funds and fulfill the economic conditions attached to any help.

"In my personal view, it would be good to demand that a request for primary market intervention via the EFSF/ESM must be made before the ECB takes action too," he added.

Noting that Draghi had not said the new bond-buying program would be limited in terms of time and volume, the paper asked if this meant it could be successful as it would be unlimited.

"You heard him correctly. But wait and see. We are working on further details of the new program and we will discuss this at our next meeting," Asmussen replied.

(Reporting by Michelle Martin and Paul Carrel; Editing By Alessandra Rizzo)

Source: http://news.yahoo.com/ecbs-asmussen-greek-exit-manageable-not-preferable-231516724.html

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