ECB policymakers say can do more if needed

HELSINKI/BRATISLAVA Tue Jun 10, 2014 12:39pm EDT

An illuminated euro sign is seen in front of the headquarters of the European Central Bank (ECB) in the late evening in Frankfurt January 8, 2013. REUTERS/Kai Pfaffenbach

An illuminated euro sign is seen in front of the headquarters of the European Central Bank (ECB) in the late evening in Frankfurt January 8, 2013.

Credit: Reuters/Kai Pfaffenbach

HELSINKI/BRATISLAVA (Reuters) - European Central Bank policymakers stressed on Tuesday that they could still do more to support the euro zone economy after last week announcing a package of measures to ward off the threat of deflation.

The central bank chiefs of Finland and Slovakia, Erkki Liikanen and Jozef Makuch, who both sit on the ECB's 24-member Governing Council, said the bank could do more if needed.

Last Thursday, the ECB cut interest rates to record lows, launched a series of measures to pump money into the sluggish euro zone economy, and pledged to do more if needed to fight off the risk of Japan-like deflation.

"This is not it yet," Liikanen said at the Bank of Finland's quarterly news conference when asked about remaining tools in the ECB's kit. "We have the capacity to act, we can make decisions, this has not changed."

In Frankfurt, German Finance Minister Wolfgang Schaeuble said the ECB's policy measures were appropriate given low euro zone inflation, but added: "The ECB should stick no longer than necessary for price stability to their low interest rate policy."

ECB President Mario Draghi said after announcing the package last week that "we aren't finished here", indicating that so-called quantitative easing (QE) - or money printing to buy assets - is on the table.

Draghi made the comment during the question and answer session of his news conference, not in the statement he read out announcing the measures, on which he said there was unanimity.

Bundesbank chief Jens Weidmann insisted on Friday that "it would be absurd to already start talking now about a further set of measures."

But the latest comments, and others last Friday from ECB Vice President Vitor Constancio and Luc Coene, Belgium's central bank chief, suggest a significant group on the Governing Council support Draghi's readiness to do more if needed.

Asked about asset purchases with new money, or quantitative easing, Makuch said that remained a possibility. He added that interest rates will stay low for a long time.

SUBSTANCE

"How far (rates) can go is a technical question. There is room for a further cut in the benchmark rate, and of course space for adjustment of the corridor or keeping the corridor with the new benchmark rate," Makuch said.

Last week, the ECB lowered its deposit rate - that it offers for holdings banks' cash overnight - to -0.1 percent. It cut its main refinancing rate to 0.15 percent, and the marginal lending rate - or emergency borrowing rate - to 0.40 percent.

Aside from QE, there is little of any substance left in the ECB armory after Thursday's announcement of new measures to try to steer the euro zone away from the economic quicksand of deflation.

Clemens Fuest, president of the Mannheim-based think tank ZEW, saw a high probability of the ECB embarking on large-scale asset purchases, similar to programs exercised by the U.S. Federal Reserve or the Bank of Japan.

Asked whether he expected the ECB to launch such a program, Fuest told German financial daily Handelsblatt: "Yes, I see the probability for this at 95 percent."

The ECB had signaled that QE was part of its strategy and since the agreed measures would probably not solve the problems, there would soon be calls for new measures, Fuest told Handelsblatt in the interview published on Tuesday.

QE would make sense to avert the risk of slipping into a deflationary spiral, he said, adding that he saw no danger of this happening at the moment.

ECB Executive Board member Benoit Coeure said the euro zone was not in crisis mode anymore and that policymakers must now secure long-term growth. Coeure was speaking during a panel discussion at a conference in Frankfurt.

(Additional reporting by Eva Taylor; Writing by Paul Carrel; Editing by Janet Lawrence)

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Comments (1)
ECB “died” when they appointed the Goldman Sachs employee! Along with EU of course! Ethics died! Cash went to dirty hands “officially” and US alike rules of “too big to jail” come to EU also!

Globally there are so many gaps on regulations on Purpose! If there were not, no Money Laundering would be easy, as it is today! Also these guys that want to destroy middle class globally would not be easy to achieve their purpose! Bankers should get unaudited money with 0% interest rates (!!!!) or negative rates in order to lend it their “choosen” people Globally, always with criteria that provoke sceptism!

In Greece, a well supported by ECB corrupted Banking system has seen so many public scandals, even involving the main central Banker Provopoulos. What has happened? Politicians and Bankers, visit US and then markets rise, they corrupt again public data and do whatever they want!

This guy was so corrupted, with so many evidence, even public, against that it makes you wonder about the Greek Justice System, how has stayed out of Jail! But after a bit you stop wondering…its obvious what is happening!

Well on the other hand, Venizelos similarly has Managed to do the same in Greece and at the same time Govern a country with a 8% election percent! Even Public information against politicians is provately ignored by some “word to word” Prosecutors that try really hard to find a “window” secret law to make the Illegal – seem legal!

How he did that all that? Visited US!!!! Just like that! A “secret” meeting with Bayden and Greece ILLEGAL goverment gets CASH, SUPPORT, MEDIA PROPAGANDA, and NSA Alike Information to battle her opponents! But ECB was needed to of course make this come true!

Jun 12, 2014 4:10am EDT  --  Report as abuse
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