BERLIN (MNI) – European Central Bank Executive Board member Joerg
Asmussen reaffirmed Thursday that the euro was irreversible, noting that
the ECB’s new bond-buying program, the OMT, was designed to counter
unfounded fears about a break up of the Eurozone.

“The possible purchase of government bonds with short maturities on
secondary markets is aimed at countering unfounded fears about a break
up of the Eurozone,” Asmussen said in a draft for a speech to be
delivered at an insurance industry conference here.

“The euro is irreversible,” he stressed. “Only a currency on which
there is no doubt about its survival is a stable currency.”

The fragmentation of financial markets in the Eurozone has brought
about a “foreign exchange rate risk which should not exist in a currency
union,” the Executive board member explained. “We as a central bank must
counter this problem,” he said.

With the OMT the ECB is assuring a functioning of the monetary
policy transmission “in order to assure price stability for the whole
Eurozone,” Asmussen said.

“Buying bonds on secondary markets is within the mandate of the
ECB,” he reaffirmed. Such government bond purchases would not be state
financing, he insisted.

Worries that inflation could result from the OMT and the current
very low ECB interest rates “are unfounded,” the central banker
stressed. He reminded that the ECB would sterilize any bond purchases.

“Our current forecasts project that inflation in the Eurozone will
be below 2% next year,” Asmussen said. “Even more important, inflation
expectations in the Eurozone are solidly anchored – financial markets
are pricing in an inflation rate of just under 2% over six to ten

Yet, Asmussen said the ECB can only counter unfounded fears of a
catastrophy. “Finding sustainable ways out of the crisis is clearly the
job of the member states,” he stressed.

He noted that crisis-hit states in the Eurozone have made
substantial progress in making their economies more competitive and
bringing their current account deficits down.

“Claims that certain countries can only regain competitiveness by
leaving the Eurozone are wrong,” the Asmussen said. “Some want to make
us believe that we’re acting in a self-destructive way. But this is
clearly not the case.”

He acknowledged, though, that there still remains a lot to be done
in most Eurozone member states. “The budget situation in many euro
countries is weak despite reduced deficits,” he remarked.

Short-term relieve of refinancing pressures must not lead to a
slowing of reform efforts, Asmussen urged. “I’m confident, though, that
we won’t lose the necessary drive,” he said.

–Berlin bureau: +49-30-22 62 05 80; email:

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