PARIS (MNI) – Debt rescheduling is not an appropriate way out of
the sovereign crisis, European Central Bank Governing Council member
Christian Noyer said Tuesday.
In his introductory letter to the annual report of the Bank of
France, which he heads, Noyer said that “compliance with strict,
rigorous conditionality is crucial to the design and implementation of
the adjustment plan.”
He continued: “It is a dangerous illusion to think that such
conditionality can be relaxed by virtue of debt reduction or
rescheduling. On the contrary, such operations do not in themselves
provide any new financing. They always lead, at least initially, to a
further drop in confidence and lower capital inflows, which increases
the adjustment effort needed.”
Mechanisms established to resolve crisis “should, of course, only
be used as a last resort and cannot replace the effective prevention
provided by continuous fiscal discipline,” Noyer said.
Noyer warned of second-round effects on wage- and price-setting as
a potential source of inflationary spirals and stressed that monetary
policy must prevent such effects “at all costs.”
“It now appears necessary for us to very clearly show our
determination to prevent the upward pressures on energy and commodity
prices from spilling over to the general level of prices, and to keep
inflation expectations anchored at levels consistent with price
stability,” he said.
In other remarks, Noyer deemed it “important to ensure that global
liquidity is kept well under control.”
–Frankfurt bureau tel.: +49-69-720142. Email: dbarwick@marketnews.com
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