SARRIA, Spain (MNI) – The European Central Bank is watching
developments in the Eurozone but it is up to governments to talk about
whether a country requires a financial bailout, ECB Executive Board
member Jose Manuel Gonzalez-Paramo said late Friday.

Speaking to reporters before a presentation here, Paramo, asked
whether a financial rescue of a euro area country would be needed,
replied, “We are following the situation in all the countries of the
Eurozone with much attention,” but it is up to the governments and not
the ECB to pronounce themselves with respect to a possible rescue.

Pressed specifically about Ireland’s possible need for a bailout,
Paramo said that “this is a judgment that is incumbent on national
governments and the institutions of the European Union. I believe that
it is very important to underscore the declaration that five ministers
of finance made in Seoul on the occasion of the G-20 meeting.”

The statement by the five finance ministers said that a proposal
under consideration to put private sector creditors on the hook in
future EU sovereign bailouts would have no effect on current creditors
and would apply only to debt obligations purchased after mid-2013, the
target date for a new crisis resolution mechanism to replace the
European Financial Stability Facility, which expires then.

There is “nothing” about the British, German, Italian, French and
Spanish finance ministers’ statement that puts European bonds at a
disadvantage versus the bonds of other economic areas of the world,
Paramo said. “I believe that it is important to say the obvious things
because when there is confusion in the markets, then clarity helps,” he
added.

As to whether the ECB might find it opportune to step up its bond
buying, Paramo observed that the ECB makes clear every week what volume
of Eurozone sovereign debt it has purchased, “and at every moment we do
what we believe necessary to restore the monetary policy transmission
mechanism, which is what this program is aiming at.”

He declined to confirm that the transmission mechanism is currently
functioning well, saying merely that authorities try to keep it working
“as well as possible.”

Paramo was also unwilling to pronounce himself in favor of German
Chancellor Angela Merkel’s approach to the possibility of having to deal
with an insolvency in Europe, or that of Spanish Prime Minister Jose
Luis Rodriguez Zapatero.

“I cannot be against or in favor of the position of any
government,” he said. “We are simply very attentive spectators and we
have a very clear vision: systemic financial stability at the level of
the euro should be preserved by any form or any mechanism.”

In other comments, Paramo affirmed that economic growth “divergence
is not new in the euro area. Certainly it will be lower next year
because the exit from the crisis takes place at different speeds.”

It is important that the divergences diminish, he conceded, though
he stressed that in international comparison those of the Eurozone are
not extraordinary.

–Frankfurt bureau tel.: +49-69-720142. Email: dbarwick@marketnews.com

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