FRANKFURT (MNI) – The Eurozone is currently not in the same
situation as in 2009, when the European Central Bank cut its main
refinancing rate sharply towards the end of the year, ECB Executive
Board member Lorenzo Bini Smaghi said in an interview published Tuesday.
“What we did over the last six months was to reduce the degree of
monetary accommodation, which was calibrated for a very sharp recession
and the risk of some deflation, which [had] characterised the situation
back in 2009,” Bini Smaghi told Markit magazine. “Compared with 2009, we
are now in a different situation.”
In a separate interview with the Australian Financial Review, Bini
Smaghi suggested that maintaining interest rates low for too long could
also have negative effects.
“I think there is a need to work on the deleveraging of the
financial system also, and the sooner you do this, the sooner you put
the countries back on a path of sustainable growth,” he said. “If you
slow down the deleveraging — if you go on with very low interest rate
policy and so forth — the risk is that the adjustment never takes place
or is postponed, and either you have low growth or you have a new
crisis.”
In the interview with Markit, the central banker stressed that the
ECB had never claimed to be on a rate hiking cycle when it increased
rates two times earlier this year. “We said we were guided by the pace
of recovery,” he said. “So we will continue to make our decisions on the
basis of economic developments and inflationary pressures.”
Bini Smaghi cautioned against making “generic statements” regarding
banks in the Eurozone, adding that markets need to be able to
“distinguish between the different situations.”
“We need to make sure the more fragile parts of the system are
strengthened,” he said.
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— Frankfurt bureau: +49 69 720 142; email: frankfurt@marketnews.com —
[TOPICS: M$$EC$,M$X$$$,MT$$$$,MGX$$$,M$$CR$]
