ECB’s Papademos: Greek aid must tackle core weaknesses

The aid package for Greece must tackle the country's economic weaknesses from the ground up, European Central Bank Vice-President Lucas Papademos said on Tuesday.

Papademos, a former head of the Bank of Greece, said financial market pressures towards Greece had intensified despite the country's promises to clean up its public finances and support for the reforms from European Union policymakers.

Greece asked for emergency aid on Friday and is currently in talks with the European Union and the International Monetary Fund on the terms of the deal.

"It is essential that the economic programme currently being prepared by the European Commission, the ECB and the IMF together with the Greek authorities specifies comprehensive fiscal measures and structural reforms that will address the root causes of Greece's fiscal imbalances and structural weaknesses, so as to ensure the sustainability of its public finances and improve the country's international competitiveness," Papademos told a European parliament committee.

He urged all euro zone countries to stick to EU budget rules and warned that some countries' fiscal plans did not have enough detail or were based on over-optimistic assumptions.

Presenting the ECB's 2009 annual report, Papademos said inflation in the 16-nation region was expected to remain moderate and risks to the outlook were broadly-balanced.

ECB Governing Council member Axel Weber, who also heads Germany's central bank, last week warned that short-term inflation risks, although low, were tilted to the upside.

Inflation jumped to 1.4 percent in March from 0.9 percent in February.