Jean-Claude Trichet, the president of the European Central Bank, said today that any EU loans made to Greece to help it deal with the financial crisis should come with very strict conditions attached.

Greece should only be offered aid it there was an “immediate and grave threat” to the country and the eurozone, he said, ruling out offering the country any subsidies.

Speaking to the European Parliament’s economic and monetary affairs committee, Trichet also urged eurozone member states to show greater fiscal discipline and increase the stability of the eurozone by applying more pressure on poor performers in order.

“I have always called for discipline and that, of course, also applies to Greece”, Trichet told MEPs, referring to the EU’s stability and growth pact rules aimed at ensuring that all eurozone members keep their public finances in order.

The ECB chief said EU aid, which member states are considering making available as bilateral loans to Greece, should only be allowed “if it corresponds to an immediate and grave threat to the country in question and if it would have an impact on the euro-area as a whole”.

“We can only talk about a loan without any subsidy elements. That needs to be extremely clear,” Trichet told MEPs, adding that that sort of loan was the “only possibility”.

The Greek government has called for EU leaders to agree at their summit in Brussels on Thursday (25 March) to a stand-by aid plan, which would include bilateral loans, in case Greece needs it.

German Chancellor Angela Merkel is opposed to making an announcement about the size or form of the aid unless Greece needs to use it. 

European Commission President José Manuel Barroso has called for EU leaders to take a decision at the summit on Thursday to end what he called that “great uncertainty” threatening the stability of the eurozone.  

‘Courageous’ Greece

Trichet said austerity measures implemented by the Greek government were “convincing and courageous”, adding that he hoped market speculators would soon realise that Greece was serious about restoring its credibility, which should result in lower interest rates on loans.

He rejected calls by MEPs to toughen or expand up the EU’s stability and growth pact’s rules in the wake of the Greek crisis.

Trichet said that that what happened in Greece should be “a very important wake-up call” to eurozone member states to stick more closely to the pact’s stringent deficit and debt rules.

“I would make a plea for implementing the pact,” said Trichet. “We know what happens when it is treated with benign neglect.”

Trichet also rejected a suggestion by Merkel that in future eurozone members that fail to live up to the pact’s rules should be kicked out of the currency area.

“I consider absurd the hypothesis of leaving the euro-area,” said Trichet. “The euro-area is not ‘à la carte’. We enter in the euro-area to share a destiny in common.”