FRANKFURT (MNI) – The European recovery is on track, European
Central Bank Executive Board member Gertrude Tumpel-Gugerell said in an
interview published Friday evening.

Austerity measures implemented by European countries might hurt
growth in the short term, but in the long term they will have the effect
of building confidence, the Tumpel-Gugerell told China’s 21st Century
Business Herald newspaper.

Looking at both economic and monetary developments for a reading of
the price stability outlook confirms that “our policy rate is
appropriate,” she said.

The ECB “has no fixed timetable” on the withdrawal of extraordinary
measures, but rather “we continuously monitor developments and decide on
the basis of these developments what measures to take,” she said.

Asked what her message would be on her upcoming trip to China, she
said “first of all, the recovery is on track in Europe.”

“Second, the governments have started to address the fiscal policy
challenges,” she said. “Regarding monetary policy, we are confident that
our main objective, namely price stability, will be ensured in the
medium term.”

Tumpel-Gugerell said that austerity plans announced by various
governments “might have a short-term impact on growth, but in the long
term it has a confidence building effect because the citizens in Europe
also want to see that the public finances are under control.”

Queried about the short and medium-term value and credibility of
the euro, Tumpel-Gugerell said the single currency “has achieved what it
was created for, namely to ensure price stability, to create confidence
and also to facilitate trade.” It is, “credible,” she added.

Tumpel-Gugerell was cagey in answering a question on what would
happen if EU bank stress tests showed weaker results than expected and
whether the EU had enough tools to cope with this possibility.

“Let’s wait for the results first. If needed, banks can raise more
capital. They can approach the shareholders or use unused capital
commitments provided by the governments. They can adjust the business
model as well.”

–Frankfurt bureau; +49-69-720142;

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