Frieden Warns of Crisis Return If Europe Reform Drive Relaxed

Luxembourg Finance Minister Luc Frieden urged euro-area governments not to put off the steps needed to spur their economies and rebuild trust with investors.

Market turmoil could quickly return unless countries such as Spain and Greece maintain the pressure for reform, Frieden said in an interview in Nicosia, Cyprus yesterday after talks with European finance chiefs.

“It’s clear that a new element can come at any moment that will ignite the crisis again,” Frieden said. “That’s why it’s important to know as soon as possible, and the sooner the better, in all the individual cases, Greece, Spain, what the next steps are and there has to be intensive work on this.”

The comments underscored concerns that the calm in financial markets since the European Central Bank unveiled its bond-buying program could lull political leaders into a false sense of security that dilutes efforts to cut budget deficits and boost growth.

Markets have rallied in the wake of the ECB’s Sept. 6 pledge to bring down borrowing costs by buying bonds and a German court ruling this week that cleared the way for a permanent bailout fund for the 17-nation euro region.

The euro yesterday rose to $1.3137, the highest since May 4. Spanish 10-year government bonds yielded 408 basis points more than equivalent German debt, down from 552 basis points at the end of August.

At yesterday’s talks, finance ministers put off decisions on aid for Spain and a loosening of Greece’s loan terms. “In a crisis, time is always relative,” Frieden said. “That’s why I think one should try to progress as fast as possible.”

Frieden said it was too early to say whether Greece should get more time to meet deficit-reduction targets demanded by creditors in return for further installments of aid.

“We have a program, now we have to see the implementation of that program and the consequences if part of it is not fully implemented,” he said. “We will only be able to say that in a few weeks from now.”

To contact the reporter on this story: Stephanie Bodoni in Nicosia at

To contact the editors responsible for this story: Anthony Aarons at, Craig Stirling at

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