Monday, November 29, 1999

Euro gets thumbs-up; cbanker rejects expulsion

News posted by www.newsinfoline.com

Expelling members from the euro zone is no solution to the current crisis, a European central banker said on Friday, as policymakers lined up in a chorus of support for the single currency.ECB Executive Board member Lorenzo Bini Smaghi said neither the option of forcing a country out or allowing it to restructure would help Greece, and having such a Plan B in place as a general measure would not be in the interests of the euro area.He stressed countries that broke the rules would not be excluded."This is not consistent with the political construction underlying the euro, and ultimately not a credible threat," Bini Smaghi said in a speech prepared for delivery in Brussels.Bini Smaghi said forecasts that the euro zone would collapse under the weight of the current debt crisis were premature, echoing support for the single currency from other policymakers."Of course the euro will survive," fellow Executive Board member Gertrude Tumpel-Gugerell said in an online chat hosted by Austria's Der Standard newspaper."Countries with high budget deficits and state debt have started corrective measures. This will strengthen confidence in the euro."French Economy Minister Christine Lagarde told Reuters on the sidelines of Russia's top business conference the euro was "safe", and a solid and credible currency.Speaking in southern Spain, the ECB's Jose Manuel Gonzalez-Paramo said economic and regulatory reforms were essential to complement extra support from the ECB and governments' belt-tightening."The economic growth forecast would never happen without fiscal adjustment, because public sectors wouldn't be able to find financing if the markets continue as they are," he said.Bini Smaghi said there was no such thing as an 'orderly' debt restructuring process for advanced economies in a monetary union, rejecting an idea put forward by German policymakers including fellow ECB Governing Council member Axel Weber.It would also be wrong to assume that euro area would fail unless it was a fully federal system, he said, since the region's strength lay in its member states having the right to set their own policies.An ECB legal paper last December said expelling a country from the euro zone was technically possible under the new Lisbon treaty, although very unlikely.CRISIS MEASURES TEMPORARYTo combat the latest phase of the financial crisis, the ECB has started buying government bonds, worth close to 50 billion euros so far, and revived some of the extra lending measures it introduced at the height of the crisis.Gonzalez-Paramo said the ECB's actions had helped soothe market tensions -- although some remained -- but could not continue indefinitely."Even though the non-standard measures have served the economy well, we are fully aware that keeping them for longer than necessary would entail risks that should be avoided," he said."Hence, their temporary nature and our willingness and ability to phase them out when they are no longer needed."For graph of bond buys, please see:http://graphics.thomsonreuters.com/10/EZ_2BNDPR0610.gifGonzalez-Paramo and Tumpel-Gugerell said they did not see inflation overshooting the ECB's 2 percent ceiling.In a speech in Moscow, ECB President Jean-Claude Trichet said the ECB's purchases of government bonds would not endanger price stability."The Securities Markets Programme is time-bound in nature," Trichet said. "It is aimed at ensuring the proper transmission of monetary policy impulses to the wider economy and, ultimately, to the general price level."(Additional reporting by Sakari Suoninen in Frankfurt and Vladimir Soldatkin in St Petersburg, Russia; Writing by Krista Hughes)
News posted by www.newsinfoline.com
Click here to read more news from www.newsinfoline.com
Please follow our blogs

newsinfolinephotogallery
prabugallery
newsinfolinephotogallery1

photogallery1

No comments:

Post a Comment