FRANKFURT (MNI) – The Eurozone still requires a sustainable
solution to its sovereign debt crisis, and politicians must reduce their
reliance on monetary policy as a solution, Bundesbank board member
Andreas Dombret said Thursday.
In prepared remarks to the German-Brazilian Chamber Of Industry and
Commerce in Sao Paulo, Brazil, Dombret said the ECB’s monetary policy
actions to date have been successful in seeing that the Eurozone economy
is “not overly affected by the tensions in the financial markets.”
But he added: “What is important in this context is that we never
lose sight of the primary objective of monetary policy, which is to
safeguard price stability. For this reason, we are concerned by
politicians’ growing expectations of the central bank. Central banks
must not conduct fiscal policy.”
Instead, the Eurozone crisis requires a long-term solution that can
only come from fiscal consolidation, structural reforms and closer union
at the European level. Europe-wide banking supervision “if done
properly, could play a major role in this,” he said.
Dombret argued that emerging economies were feeling the effects of
the Eurozone crisis primarily through financial market channels –
capital and foreign exchange market fluctuations – and played down the
impact on the real economy and trade. He suggested emerging economies
look closer to home for the primary causes of their own slowdowns.
“The impression that the crisis in Europe represents a decisive
obstacle to growth for the rest of the world and, in particular, for the
emerging and developing countries is misleading, however, and diverts
attention from other problems and weaknesses,” Dombret said.
— Frankfurt bureau: +49 69 720 142; email: ccermak@mni-news.com —
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