VIENNA Oct 12 The dollar's role as the world's
leading reserve currency is at risk because of the political
impasse in the United States, which has raised fears of a debt
default, European Central Bank policymaker Ewald Nowotny said.
President Barack Obama and congressional Republican leaders
inched toward resolving the standoff on Friday, but struggled to
agree on a short-term deal to increase U.S. borrowing authority
beyond an Oct. 17 limit and to reopen the government.
"If it really comes to a collapse, no one knows exactly what
will happen. One expects that there are chances to postpone the
effects but by the end of the year at the latest it will be
rather dramatic," Nowotny told Austrian broadcaster ORF in an
interview aired on Saturday.
"It is apparent that it is extremely dangerous when the
politics of a country whose currency is the world currency - it
is still the most important currency - are driven primarily by
very narrow domestic considerations," he added.
"This discrepancy is very dangerous and in my view will have
a negative impact on the long-term role of the dollar."
Interviewed in Washington during meetings of the
International Monetary Fund and World Bank, Nowotny said jitters
over the U.S. budget standoff were already pushing the euro
This was not such a big problem for Austrian exporters but
posed more of a threat to southern euro zone members, said
Nowotny, who is also governor of the Austrian central bank.
Jobless rates in Europe were still too high, he said, noting
that the euro zone economy would contract this year. He said
Europe needed to reduce budget deficits but not so abruptly that
it created a negative impact on the economy.
Policymakers will likely know only by mid-2014 whether
Greece will need a third bailout package, he said, adding: "An
immediate aid programme is not in sight."
Nowotny expressed confidence that Austrian banks such as
Erste Group and Raiffeisen would
pass stress tests that major European lenders face next year.
"There is a fear that a certain nervousness will arise in
the overall European banking system in connection with stress
tests. In such a sensitive situation it is good to be in a
position of strength and I am sure the Austrian banks will
achieve this," he said.