BRUSSELS The European Central Bank will steadfastly enforce conditions attached to sovereign bond purchases under its programme to help euro zone states cut borrowing costs, ECB Governing Council member Luc Coene said.
In an interview in Thursday's edition of weekly magazine Trends, he also said the chance of Spain seeking international aid had diminished, and that the ECB still had more room to act if economic conditions in the euro zone worsened further.
Spain is considered the most likely first beneficiary of the bond-buying programme, under which the ECB would buy potentially unlimited quantities of a struggling country's bonds.
Despite its borrowing costs having fallen sharply since the ECB announced the scheme in September, Spain is still widely expected to apply for aid in the first quarter of 2013 - thereby triggering ECB bond purchases.
Coene, who is also governor of Belgium's central bank, said any country wanting the ECB's help via the scheme would have to face the consequences.
"If we yield, the ECB will lose all credibility. At a certain moment it will be tough. But this is the line that we have drawn in the sand and we cannot and will not cross it," Coene said.
Under the programme, dubbed outright monetary transactions (OMT), a country would have to apply for aid from Europe's bailout fund before the ECB intervened.
Such aid would come with conditions, such as implementing economic reforms and hitting budget targets, though the ECB would not be technically obliged to buy the country's bonds.
"As central bankers ...we can only buy time for governments to carry out the necessary reforms, reforms that in any case are forced upon them. If we only buy time without conditions, we will destroy ourselves," Coene said.
Since announcing the OMT plan, ECB President Mario Draghi has repeatedly said countries would only qualify for bond-buying support if they stuck to the conditions.
But his comments have failed to still doubts, mainly in Germany, that the ECB would still buy bonds even if a country failed to meet the conditions attached.
Coene said the ECB's decision in favour of OMT had sent an important signal to investors and marked "an important psychological turning point for the markets."
"...The chance has become smaller and smaller that Spain will call for aid."
There were signs of economic improvement in some countries undergoing reforms, he added.
Asked what the ECB could do if a stronger euro slowed growth further in the euro zone, Coene told the magazine: "You can always go a step further, there is still room for something."
The central banker said while cutting debt was necessary, generating growth was more so, and investment in growth-friendly reforms was required.
Asked how long it would take to digest past excesses, Coene said: "The past has shown that the difficult period can last eight to 10 years... I see two sources of economic growth: externally, from developing countries, and internally, from productivity gains via structural reforms."
(Writing by Philip Blenkinsop; editing by Rex Merrifield, John Stonestreet)