HELSINKI (MNI) – “All in all, the monetary policy stance of the
European Central Bank is supportive of growth and the key policy rates
are appropriate,” ECB Governing Council member Erkki Liikanen said
Tuesday.
Liikanen, who heads the Bank of Finland, noted that low rates had
given “substantial support” to the Finnish economy during the recession,
significantly reducing the interest expense of borrowers.
But at the same time, it has led to growth in debt levels, which
threaten to be a destabilizing factor for Finnish households. “It is
very important that households conduct their own sufficiently rigorous
‘stress tests’ on themselves when considering taking out a loan,” he
said.
The danger is that they might not be “properly prepared for a
potential rise in interest rates, a sudden drop in their income, or
other unexpected situations that could undermine their ability to
service their debts,” he warned.
He added that a large debt burden “weakens the ability of
households — and, indeed, the economy as a whole — to adjust to
disturbances of various sorts. In order to ensure stable development of
the economy, it is vital to closely monitor debt levels.”
[TOPICS: M$$EC$,M$X$$$,MGX$$$,M$$CR$]
