FRANKFURT (MNI) – Policy makers must discuss an exit from the
European Central Bank’s liquidity measures now so as to avoid the
emergence of new bubbles, Bundesbank board member Joachim Nagel told
German weekly Magazine Der Spiegel.
Noting that banks may use the ECB’s cheap funds to take on risks
that they should not, Nagel said, “It is important that we discuss exit
scenarios now and signal to markets that it is not a given that things
will continue as in previous months.”
Nagel’s comments add to recent pressure from Bundesbank President
Jens Weidmann, who has insisted that “we need this discussion” now.
“That does not mean all crisis measures must be immediately withdrawn,
but that we as central bankers have an idea how we will organize and
implement an exit strategy,” Weidmann said.
Nagel, who heads the Bundesbank’s markets department, cautioned
that going forward the Bundesbank “will closely monitor what happens
with this money” the ECB has injected for three years at a record low
1.0% refinancing cost.
Trust in the interbank market has not yet been fully restored, but
soon institutions will need to “have enough strength to refinance on the
markets,” Nagel said. What is needed is “a gradual withdrawal that is
prepared early with clear statements,” he added.
–Frankfurt bureau tel.: +49-69-720 142 Email: jtreeck@marketnews.com
[TOPICS: MGX$$$,M$X$$$,M$G$$$,MFX$$$,M$$EC$,MFGBU$]