TOKYO (MNI) – European Central Bank Governing Council member
Christian Noyer on Wednesday said the ECB must first improve the
transition mechanism so lower policy interest rates will filter through
to borrowing costs for businesses and households.
Asked if there’s any urgency to help Spain out of its fiscal
problems, Noyer told reporters that it is not his major concern as to
whether the eurozone’s key policy rates should be changed at this point.
After the last ECB rate cut, lending rates actually rose, he told
the Foreign Correspondents’ Club of Japan.
“For us, the major problem is first fix the transition problem.
Once we fix the transition problem, we shall see if interest rates are
problems,” he said.
In his speech to the club, Noyer said efforts to move out of the
European debt crisis take time, first to be implemented and then to
yield their effects.
“Doubts and delays create nervousness, volatility and worry in
financial markets, which often gives rise to sharp rises in interest
rates for countries deemed to be vulnerable,” he said.
“The key interest rates that we set no longer feed through to the
real economy in the same way in all countries via the bank lending
channel — which is a crucial channel in the euro area given the
predominance of intermediated financing.”
In the question and answer session, Noyer urged governments to try
to boost economic growth by implementing structural reforms and raising
competitiveness amid signs of a further global slowdown.
“In my view, government must act to boot growth… mainly aim at
boosting growth potential through structural reforms,” he said. “If you
just try to boost growth by quick spending, (its effects) may not last
long.”
In his speech, Noyer warned that despite some bright signs in the
eurozone gripped by the sovereign debt, there remain challenges.
“There are a number of positive signs: bond market activity is
reasonably buoyant, yields of peripheral countries have declined
slightly and stock markets have picked up,” he said.
But he added: “Financial markets are highly fragmented within the
euro area and sovereign yield spreads remain substantial.
“Growth is weak and, here too, there are major disparities within
the euro area. In the second quarter, growth stood at -0.2% for the
area, after stagnating in the first quarter.”
He continued, “Germany posted the highest growth, at 0.3%, and
Portugal the weakest, at -1.2%. We are still expecting growth to recover
very gradually next year.”
As for the European Stability Mechanism that was established on
Monday, Noyer said, “It will also be able to directly lend money to
banks in difficulty without increasing the debt of their home countries
as soon as the single supervisory mechanism will be in place.”
“It is a powerful crisis resolution tool that Europe has equipped
itself with; adding to already disbursed bilateral and EFFS loans and to
the existing EU facility, the total firepower will near $1 trillion,” he
said.
tkeditorial@marketnews.com
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