By Elisabeth O'Leary
MADRID (Reuters) - The EU will have to set up a mechanism to help out member states in financing difficulties without giving members an excuse to relax fiscal discipline, Jean-Claude Juncker said on Thursday.
On the eve of a Madrid meeting of European finance ministers on Friday and Saturday, the chairman of the Eurogroup said the 30 billion euro ($41 billion) aid loan to Greece was drawn up to fill a gap in European procedure. He stressed the need for standard measures to be established in the future.
"We have resorted to these loans (for Greece) because there was no other solution within the European Treaty. For the future we will have to install a European mechanism without allowing some member states to relax and not balance their books," Juncker was quoted as saying in an interview with Spanish newspaper Expansion.
"Nor is a change in the Treaty ruled out," he added.
However little is expected to emerge for the two-day marathon meetings in Madrid. Following the loan agreement last weekend, the Madrid meeting is now expected to just "take stock" of the situation rather than seek fresh solutions, according to a source.
After an initial, positive reaction to the announcement of the safety net, markets have begun to worry about legal issues surrounding it and ambiguity over the precise way the mechanism would be activated, if Greece asks for aid.
COMPETITIVENESS
Juncker argued there was a need to keep tabs on the real economy, not just government spending and debt levels.
"Greece has lost between 20 and 25 percent of its competitiveness versus Germany in the last few years," he explained. Thus European partners had decided to discuss the topic in more depth.
"In each meeting we will examine the competitiveness of each member state," he said, adding that Spain will be one of the first countries to be examined.
The chairman of the Eurogroup, who has up to now dismissed comparisons between Greece and other euro members such as Spain or Portugal, said that structural reforms should be considered as well as plans to reduce the public deficit.
"Other ministers can advise Spain and other countries on which measures to apply, on the basis of their experience."
Juncker described the Greek aid program as "credible" adding that Greek authorities were aware of how serious their situation is.
The Greek cabinet is expected to discuss on Thursday an overhaul of its pension system, one of the elements which particularly concerned Germany public opinion when the emergency loan was agreed for Athens.
"Greece has (now) a duty of solidarity toward other euro members in meeting its plans" he said
"It is of the utmost importance for the European Union that Germany and France follow similar lines on intervention. It seems wrong though that these two countries will consider any agreement among them as mandatory (for the union)" he said.
(Reporting by Elisabeth O'Leary and Tiziana Barghini; Editing by Ruth Pitchford)
