January 12, 2015 / 3:56 PM / 5 years ago

Makuch says ECB ready for QE if needed, could handle Greek exit

PRAGUE (Reuters) - The European Central Bank (ECB) is ready to launch quantitative easing if needed, but it is too early to say what exactly this policy would consist of, governing council member Jozef Makuch was quoted as saying on Monday.

Speaking to Slovak news agency TASR after he was appointed for a second term as governor of the Slovak National Bank, Makuch also said Europe was now in a position to cope with the exit of Greece from the euro zone, if it does not want to obey the bloc’s rules.

The ECB will meet on monetary policy on Jan. 22, and the market believe it might announce a sovereign bond buying program. If not next week, the bank will certainly have done so by March, according to all but one of 20 euro money market traders polled by Reuters on Monday.

Makuch said the ECB was ready to act if it determines that measures adopted so far were insufficient.

“If measures that we talked about (those adopted so far) do not have an effect, the ECB is ready for further steps. From credit easing, or measures to support lending, if they are not successful, we have to move to quantitative easing,” Makuch told TASR.

“It is too early to say what that would entail, because the program has not been brought into life yet.”

Expectations the ECB will start printing money through quantitative easing (QE) are driven by data from last week, which showed euro zone inflation turned negative in December for the first time since 2009.

Makuch said he did not expect euro zone inflation to get close to the target of 2 percent earlier than the end of 2016.

“We do not expect that low price growth would change in the nearest quarters. On the contrary, we expect that it will be a long-term phenomenon,” Makuch said.

Asked about potential fallout from the Greek election, Makuch said the euro zone could now deal with a country’s exit if it decided it did not want to stick to common rules.

Greeks are due to vote on Jan. 25 in an election that is being watched closely across Europe where there are concerns about another standoff with Athens, should the opposition win.

“If there is a situation that a country does not want to observe the rules, it would probably be needless for us to insist on having 19 (euro zone) members,” he said.

“The euro zone started with a different number and the number of member states increased gradually. Today it would be manageable if it potentially decreased as well. It would not be a positive situation, nobody is wishing for things to go this way. But now we are prepared to manage such a situation,” Makuch said.

Reporting by Jan Lopatka; Editing by Toby Chopra

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