PARIS (MNI) – Restoring investor confidence in Eurozone banks and
government debt is the only fundamental way to address the scarcity of
financial collateral, European Central Bank Executive Board member
Benoit Coeure said Monday.
Speaking in Amsterdam, Coeure said that the Eurozone debt crisis
has prompted a flight of investors out of certain assets, like uncovered
bank bonds, that used to be considered sound. While the central bank can
adjust its requirements to ease a collateral shortage, changing investor
perceptions is the only permanent solution, he said.
“Through the restoration of fiscal discipline and implementation of
structural reforms, euro area sovereign debt will be viewed once again
as risk-free and thus contribute to a collateral supply of good
quality,” Coeure said.
He emphasized that a return of economic growth, along with a
reduction in debt, is essential.
“The only fundamental way to overcome collateral scarcity is to
ensure private and public de-leveraging as well as sustainable growth,”
Coeure said. “It is growth that generates sound assets.”
Coeure said that while the overall supply of collateral in the
Eurosystem was adequate, a lack of supply remains a concern in countries
“hit particularly hard by the sovereign debt and banking crisis.”
–Paris newsroom, +33142715540; jduffy@marketnews.com
[TOPICS: M$$CR$,M$X$$$,M$$EC$,MGX$$$]
