VIENNA (MNI) – The Eurozone will face “immediate refinancing
problems” as soon as February, European Central Bank Governing Council
member Ewald Nowotny told journalists here today.

He noted that the refinancing need for Eurozone national
governments, excluding deficit financing, will amount to around E1.3
trillion in 2012. In addition, there will be some E1 trillion worth of
refinancing needed by the banking sector in the region, Nowotny, who is
governor of the Austrian National Bank, added.

“It is necessary to take measures both long-term and also
short-term for addressing the immediate problems which will be arising
already in February,” he said.

Regarding the crisis solutions agreed at last week’s EU summit,
Nowotny noted that they “only operate over the medium term.” There must
also be short-term measures to strengthen the European bailout fund so
it can intervene in financial markets, he said. “It needs more
fine-tuning and I hope that these actions are taken swiftly.”

Nowotny asserted that ECB measures announced last week — including
two 3-year LTROs, looser collateral rules, a reduction of the reserve
ratio for banks, and the second interest rate cut in as many months —
“have been very extensive measures” and constitute “a massive step.”

He dampened expectations for any quick followup measures by the
ECB, saying he was opposed to “frequently churning out new ideas in a
very short time span without checking the effects [of previous moves] on
the market.”

Nowotny argued that “in the banking sector it will be necessary to
go more strongly into asset classes which are still stable, like the
covered bond market.”

He called into question the “problematic” role of credit rating
agencies. The effects of their announcements contribute to the adverse
market reactions that worsen the credit standing of nations, he argued.
On the other hand, “the downgrade of the U.S. was largely ignored,”
Nowotny noted. “Europe should be more self-confident in its reactions to
[rating agency] announcements.”

The Austrian central bank chief also warned that “a slowing economy
and a changing assessment of government debt” might increase credit risk
for banks and that “it is difficult for all countries to consolidate
budgets in tough economic conditions.”

[TOPICS: M$$EC$,M$X$$$,MT$$$$,MGX$$$,M$$CR$]