| HELSINKI/BRATISLAVA, June 10
HELSINKI/BRATISLAVA, June 10 European Central
Bank policymakers stressed on Tuesday that they can 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."
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
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.
"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 armoury after Thursday's announcement of new measures to try
to steer the euro zone away from the economic quicksand of
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 programmes exercised by the U.S.
Federal Reserve or the Bank of Japan.
Asked whether he expected the ECB to launch such a
programme, Fuest told German financial daily Handelsblatt: "Yes,
I see the probability for this at 95 percent."
The ECB had signalled 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)