Weidmann: No Basis To Give Up Hypothetical Greek Profits -Report

European Central Bank Governing Council member Jens Weidmann has rejected central bank participation in a voluntary Greek haircut, and said he sees no reason to give up the central bank's "hypothetical future profits" on Greek bonds.

"The decisive point is that we aren't allowed to forsake debts vis-a-vis a state. That would be a form of monetary financing," Weidmann, who is also head of Germany's Bundesbank, told German business daily Handelsblatt in an interview published Wednesday.

Asked whether the ECB might be willing to forego the profits it stands to make on its Greek government bonds, Weidmann said he sees "no basis to distribute hypothetical future profits," adding: "I am more worried about possible losses to our balance sheet from the sovereign debt crisis."

The ECB "certainly won't refuse to talk" to governments if they are willing to buy the ECB's bonds, Weidmann said, but added he doesn't "see such a willingness" from governments.

The Bundesbank president reiterated that it is up to governments, not central banks, to solve Greece's debt crisis.

Greece's recent decision to support new austerity measures is "an important step," Weidmann said. Still, "ultimately what is decisive is the implementation of the measures," he said. "For that, an administration is needed that can implement the measures" as well as a population that can support them.

Euro-zone finance ministers are only likely to make a decision on Greece's second bailout package once there is clarity on "several promised measures on the labor market and a binding avowal of all leading politicians to the reforms beyond the coming elections," Weidmann said.

Greeks protested violently in the streets ahead of the parliamentary vote and there is serious doubt over whether the country can implement the new measures, which are required before the embattled state can receive its second bailout package.

Weidmann warned that a Greek exit from the currency union "wouldn't in itself represent a contribution to solving the problem," and would "produce contagion effects that are difficult to estimate."

Weidmann also said the Bundesbank will have to build up more risk provisions in the face of the euro-zone debt crisis and this will reduce the central bank's profit.

"This has a corresponding influence on the amount of the Bundesbank's profits," he said. It is clear that due to rising risks, "we need rather more provisions than less."

Asked about the ECB's government bond purchases, Weidmann warned that the program "strongly stretched our mandate," and "some of the Eurosystem's unconventional measures reduce the pressure to reform." The bond purchases "should come to an end as soon as possible," he stressed.

Weidmann said he doesn't see a danger of inflation despite the ECB's extensive provision of liquidity, given the "cautious" economic backdrop in the euro zone. Still, "that can change, and we must watch developments and then draw back the liquidity in time," he said.