FRANKFURT (MNI) – The European Central Bank wants to remove any
doubt about the permanence of the common currency, ECB Executive Board
member Joerg Asmussen said in a newspaper interview published in
Monday’s edition of the German daily Frankfurter Rundschau.

The German board member told the paper that financial market
certainty regarding the continued existence of the euro was a necessary
condition for the currency’s stability.

The ECB’s planned new bond-buying program is superior to its
predecessor, the Securities Market Program, and the Governing Council
will work on details at its next meeting, Asmussen said.

Noting the high risk premia for some sovereign bonds in the euro
area, which he said were in part due to concerns about the reversibility
of the euro, Asmussen said that such an exchange rate risk was
theoretically not admissible in a currency union and was leading to the
incomplete transmission of ECB monetary policy to some euro area

“Our measures attempt to repair this defect in the monetary policy
transmission mechanism,” he said. The worries about the euro’s
permanence are no wonder, he added, given “how carelessly” the currency
is talked about in Europe.

“It is precisely these concerns about the continued existence of
the euro that we want to rid market participants of,” he said.

Asmussen asserted that the ECB is acting within its mandate, adding
that “a currency can only be stable if there is no doubt about its

The new bond-buying program meant to address this issue “will be
better conceived” than the SMP, he said, repeating that the ECB will
only act in tandem with the EFSF or ESM and that interested countries
must submit a request and satisfy “comprehensive economic policy

The ECB’s Governing Council “will decide in complete independence
whether, when and how bonds are purchased on the secondary market,” he

What happened last summer with Italy, which failed to use the time
bought by ECB bond purchases to make necessary adjustments, cannot be
allowed to happen again, he said.

Moreover, in the new program the ECB will deal with the problem of
senior status, which interferes with affected countries’ return to
capital markets because private investors fear being disadvantaged
vis-a-vis the ECB, he said.

Asked if the new program could be successful because it will be
unlimited in time and scope, Asmussen confirmed that ECB President Mario
Draghi had said as much.

“But wait and see,” he said. “We are working on the design of the
new program and will occupy ourselves with these questions in our next

Asmussen repeated his preference for Greece to remain in the
Eurozone, but added that it was up to the Greeks to ensure this would

Although an exit from the Eurozone would be manageable, it “would
not be as orderly as many imagine,” Asmussen warned. “It would be
associated with reductions in growth and higher unemployment, and would
be very expensive – in Greece, in all of Europe and in Germany as well.”

The manageability of a Greek exit does not mean the risk of
contagion is gone, he said. It is hard to know what the day after such
an event would bring, he cautioned.

It “would indeed be good if the ESM could commence its work as soon
as possible,” he said, calling it “the better instrument for handling
the crisis than the EFSF.”

Eurobonds “are a logical element only in a complete fiscal union,”
Asmussen asserted. “They are not an element of crisis management.”

The Bundesbank is not isolated in Europe and “no one should try to
create the impression that the Bundesbank or its president is isolated,”
he said.

Credit and money growth in the euro area are “moderate,” and
“inflation expectations in the entire Eurozone are firmly anchored to
our target,” he said. “We are monitoring price developments very closely
and have all the necessary instruments to fight possible inflationary
dangers effectively and in a timely manner.”

–Frankfurt bureau tel: +49-69-720-142. Email:

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