–But Prudence Still Warranted

ISTANBUL (MNI) – A turning point has likely been seen in credit
growth and this is a positive thing, European Central Bank Executive
Board member Juergen Stark said Tuesday.

Stark, the ECB’s chief economist, also said the central bank is
currently in the process of exiting its non-standard liquidity measures
and future moves in that direction will be decided at “one of the
forthcoming meetings.”

Stark, speaking on the sidelines of the Global Economic Symposium
here, declined to comment on recent intervention by the Bank of Japan to
prevent the yen from rising further against the dollar.

Asked about the latest data on monetary and credit developments in
the Eurozone, which showed robust annual growth in M3 and loans to the
private sector for the second straight month, Stark said, “We have to be
very prudent in assessing these numbers. What we can say from today’s
point of view is that we very likely have seen a turning point to
positive credit growth and this is a positive sign.”

“But this has to be monitored closely in the months to come,” he
added. Pressed on whether the monetary data will impact the bank’s exit
strategy, Stark said simply, “we are in the process of phasing out the
non-standard measures.”

In the fourth quarter of this year “a number of non-standard
measures will mature, and they will not be renewed,” Stark noted. “We
are in this process already. What we will decide for the time after
December 31″ will be a topic of “one of the forthcoming meetings,” he
said.

Stark declined to discuss disagreements between France and Germany
on future EU budgetary rules but underscored that the ECB favors a
“higher degree of automaticity in the procedures and also in applying
sanctions, so we have to strengthen the fiscal rules, which have not
been fully applied and have been weakened since 1998.”

“We have now the only chance to strengthen the rules, otherwise
there is a real risk that member states will not run sound and
sustainable fiscal policies,” Stark warned.

–MNI Istanbul; +49-1736947935; tbuell@marketnews.com

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