* Says should exit some measures as soon as possible
* Low interest rates not without risks in the long run
* Sceptical about idea of ECB buying corporate bonds
* Shares ECB's reasoning for OMT, worried about long-term
* Should not overburden ECB, govts need to reform
By Tom Körkemeier and Eva Taylor
BRUSSELS/FRANKFURT, Jan 13 Sabine
Lautenschlaeger, the Bundesbank vice president set to replace
Joerg Asmussen at the European Central Bank, struck a hawkish
tone on Monday as she warned that low interest rates "are not
Speaking to European lawmakers vetting her candidacy,
Lautenschlaeger expressed scepticism about some of the measures
left in the ECB's depleting policy toolbox - a stance that may
make life difficult for the bank's president, Mario Draghi.
The 49-year-old Bundesbank vice president declined to say
whether she would be close to the German central bank's chief,
Jens Weidmann, on policy issues and vowed to "have my own
She immediately took a hawkish line on standard policy
tools, but appeared to support Draghi's flagship policy response
for fighting the euro zone crisis, the ECB's government bond
purchase plan known as Outright Monetary Transactions (OMT).
"A period of prolonged monetary policy accommodation with
interest rates being low for a long period is not without its
risks," she told the European Parliament's economic and monetary
affairs committee in Strasbourg.
"In fact low interest rates may be associated with spurring
asset price bubbles", she added.
Asmussen's departure has left Draghi short of a key German
ally on the six-member board that implements monetary policy.
The central bank is considering some divisive measures, having
already cut interest rates close to zero.
Asked about the idea of the ECB buying corporate bonds to
support the euro zone economy, Lautenschlaeger expressed
concerns about the central bank taking such risk onto its
balance sheet: "I'm rather sceptical, I have to admit."
She said the idea of the ECB cutting into negative territory
the deposit rate it pays banks for holding their money overnight
- in other words making them pay rather than receive interest -
was technically and legally possible.
But she added: "When the situation comes up, the ECB needs
to look into the consequences and whether it would be really an
instrument helping, supporting the economy."
Earlier, Lautenschlaeger said in written responses to
questions from the parliamentarians that "some of the (ECB's)
measures should be exited as soon as possible because of their
Lautenschlaeger, who made her name as an expert in banking
supervision, is the only candidate to succeed Asmussen, who left
the ECB two years into his eight-year term to rejoin the German
government as state secretary in the labour ministry.
The committee voted in favour of Lautenschlaeger's
nomination following her hearing. Now the EU parliament is due
to decide on Thursday whether to back her, and the European
Council will then have the last word.
The reshuffle at the top of the ECB comes at a delicate
time. Euro zone inflation has undershot the ECB's price
stability target of just below 2 percent for several months and
economic growth is weak despite record low interest rates.
At its policy meeting in January the ECB strongly underlined
its readiness to take further action if needed but remained
unclear about where the trigger points are and what the response
would be. It is running out of standard tools.
Germany's Constitutional Court will soon rule on one of the
ECB's most contentious measures, the OMT, which took the heat of
the debt crisis as its promise of unlimited sovereign bond
purchases provided the necessary backstop to calm fears the euro
would fall apart.
Asmussen proved helpful to Draghi at the outset of his ECB
stint, helping him build support for his signature bond-buying
plan in Germany. The question is whether Lautenschlaeger will
take up a similar mediating role on the board.
Lautenschlaeger said she agreed with the ECB's reasoning
behind the OMT scheme - to fix uneven transmission of ECB
monetary policy - but she was worried whether the programme
might lead countries to slow reforms.
"If certain aspects of the programme are not implemented
(once it is in action), the OMT cannot be continued," she said,
echoing Asmussen's position on the matter.
Her arrival would lead to a change of responsibilities among
the six members. With her strong background in banking
supervision, Lautenschlaeger is poised to get the corresponding
portfolio, which would also put her in pole position to become
the vice chair of the new European banking watchdog.