FRANKFRUT Dec 6 A leading European Central Bank
policymaker sought to allay concerns that the bank's attempts to
revive private lending in the euro zone might trigger inflation,
saying there were no signs of widespread price increases around
Executive Board member Joerg Asmussen said ECB moves to
flood the interbank market with liquidity were needed in the
wake of the financial crisis because banks were failing to lend
to each other.
"There are different concepts of liquidity and not all
liquidity that a central bank makes available is inflationary,"
Asmussen said at a banking conference held shortly after the
ECB's monthly rate meeting.
Concerns about the ECB policies leading to runaway inflation
have commanded attention in Germany, the European Union's
paymaster and largest economy, where property prices have
mushroomed as investors seek protection in real assets.
"Despite strong growth in the size of the central bank's
balance sheet, there are no current signs of increasing risks of
inflation recognizable in the medium term," he said.
Asmussen said he directed some of his comments specifically
at the German public, where the nature of the crisis debate was
"clearly very special" compared to that of its euro zone
While the debate in Germany reflected concerns that the ECB
had done too much in response to the crisis, the debate outside
of Germany questioned whether the euro zone's most powerful
firefighter had done too little.
The ECB needed to grease the wheels of banks whose lending
operations ground to a halt during the crisis, said Asmussen, a
former German deputy finance minister who joined the ECB in
"But this ample, available liquidity is not to be confused
with the growth in money supply or credit that drives
inflation," he said.
"That is where we see a very subdued underlying momentum.
Banks continue to be very reserved in the provisioning of credit
to the private sector and demand for credit is also low,"
(Writing by Thomas Atkins; editing by Paul Carrel and Gareth