By Annika Breidthardt
POTSDAM, Germany (Reuters) - The European Central Bank should buy sovereign bonds of troubled euro zone states only if the International Monetary Fund is involved in setting the economic reform programs that should be a condition for the intervention, a top ECB policymaker said.
European Central Bank board member Joerg Asmussen said on Thursday the euro zone's bailout funds should be used to intervene on the primary bond markets of countries that request aid before the bank acts. This aid would be conditional on extensive economic reforms.
"From my point of view this means that the IMF will be involved in setting the economic adjustment programs because the IMF of course has unique know-how and has high leverage as an external policeman in these cases," Asmussen said.
With rumors swirling that Spain could request a rescue loan from Europe, the IMF reiterated on Thursday it was not in talks with Madrid on a bailout and was not making plans for one.
IMF spokesman Gerry Rice said it was up to Madrid to decide if it wanted to request aid from the European Union. A rescue by Europe would likely involve ECB buying of Spanish bonds.
Spanish Prime Minister Mariano Rajoy has said he is waiting to hear more about the ECB's bond buying program before deciding whether his country needs aid.
The ECB is being forced to take a greater role in fighting the euro zone crisis while governments negotiate legal and political hurdles to coordinating a longer-term response, but is keen not to overstretch itself.
"Nobody should expect from us that we will do our part if others don't do theirs... Central bank action is no substitute for government action," Asmussen said during a speech to his Social Democrat party members.
"Central bank action cannot and shall not iron out the mistakes of fiscal and financial market policies. Governments have to do this themselves."
Since ECB President Mario Draghi vowed a month ago to do whatever it takes to save the euro, Spanish and Italian bond yields have fallen markedly.
At a policy meeting next week, Draghi is expected to reveal the ECB's terms of engagement for intervening in the bond market, reconciling an unwilling German Bundesbank to the plan while avoiding conditions that will scupper its effectiveness.
Draghi has said the ECB will buy Spanish and Italian bonds if called upon but that any recipient country must first seek help from the euro zone's rescue fund, to which conditions will be attached.
Asmussen, one of the six-member ECB Executive Board, has already said he wants the ECB only to buy bonds with short-dated maturities and the problem of the ECB being perceived as a "preferred creditor" needed to be addressed.
He also said the new program should learn from the last one last year. It was hurt then by the experience of buying Italian and Spanish bonds, only for Italy's then-prime minister, Silvio Berlusconi, to go back on the reform promises he had made to get the ECB to step in just days after he made the commitment.
German Chancellor Angela Merkel has signaled her backing for his strategy despite warnings from Bundesbank chief Jens Weidmann that to do so would risk letting indebted euro zone governments off the hook for the austerity measures and reforms they need to implement.
(Reporting by Annika Breidthardt; Editing by Myra MacDonald)