FRANKFURT (MNI) – The European Central Bank will act to control
inflation should it remain above the ECB’s price stability threshold,
Executive Board member Lorenzo Bini Smaghi said in an interview with
Austrian newspaper Der Standard released Tuesday.
“Inflationary pressures are in part temporary and due to higher
prices for oil and food. But we must and will act again should we see
that the inflation remains above target,” Bini Smaghi said.
Bini Smaghi told the paper that the central bank is working to
return to normality on its non-standard liquidity framework but did not
sound optimistic that a return to competitive bidding would be possible
in the near-term.
“We are working on [the exit].” he said. The problem is that banks
in Portugal, Greece and Ireland are still not able to tap the
interbanking market, he observed. “Thus, we must first find a way to
reconcile this with our exit strategy.”
Bini Smaghi reiterated his strict opposition to any form of
restructuring Greek debt and dismissed talks of a voluntary extension of
maturities.
“That would not work. If a bank has a Greek bond with a maturity of
six months, what could motivate it to voluntarily give up the money and
instead grant Greece ten years. That does not work,” he said.
Instead, Bini Smaghi called on Greece to implement the EMU-IMF
austerity program in full and he warned that the country will not
receive further tranches of loans if it does not fulfill the conditions
of the program.
–Frankfurt newsroom +49 69 72 01 42; Email: jtreeck@marketnews.com
[TOPICS: MT$$$$,M$X$$$,M$$EC$]
