October 27, 2008 / 10:03 AM / 11 years ago

EU's Almunia opposes negative real interest rates

MADRID, Oct 27 (Reuters) - The European Union’s Economic and Monetary Affairs Commissioner Joaquin Almunia said on Monday that while lower financing costs were needed interest rates should not fall to negative levels in real terms.

“At this moment, it would be good for the cost of financing to go down,” Almunia told a live Internet chat with readers of Spanish newspaper El Pais (www.elpais.com), adding: “We shouldn’t go back to a situation in which real interest rates are negative, as we know from experience that this leads to excess indebtedness, low perception of risk and new bubbles which always end by blowing up in our faces.”

Almunia said it was hard to say how long the present bout of financial turbulence would last but he thought the uncertainty plaguing markets should have cleared with a year. (Reporting by Jason Webb; editing by Tracy Rucinski)

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