By David Barwick

FRANKFURT (MNI) – Hiking official borrowing costs moderately in the
Eurozone at the present juncture won’t throttle the economic recovery
underway, outgoing European Central Bank Governing Council member Guy
Quaden said in a Belgian press interview released Friday.

Quaden, who heads the Belgian National Bank until current BNB Vice
Governor Luc Coene takes over the reins on April 1, told L’Echo, “I am
moderate in my expressions and pragmatic in my choices.”

“At the last meeting of the ECB at the beginning of the month, I
supported the idea of the beginning of a normalization of our interest
rate policy,” he said.

“Because if a rate of 1% was appropriate when we were confronted by
a serious recession and by a certain risk of deflation two years ago, it
is difficult to maintain that this rate is still appropriate when growth
and inflation have become significantly positive again.

“And a moderate rise in the rates, starting from such a low level,
is certainly not by its nature going to stifle the economic pick-up,” he
said.

Observing that he had probably attended 150 monetary policy
meetings in Frankfurt during the course of his career, Quaden said “in
90% of the cases there was unanimity on the final decision.”

That, he affirmed, has to do with the “very clear” mandate of
monetary authorities to guarantee price stability and the euro’s
purchasing power, as well as with the fact that when the council members
meet, “we are all Europeans” and “we decide as a function of the
situation of the Eurozone in its entirety and not as a function of our
country.”

There is obviously no guarantee that there will be no more crises,
Quaden said.

At the moment, “the financial markets and institutions are no
longer in the dramatic situation of two years ago, but they are not yet
stabilized,” he said, pointing also to the “interaction between the
balance problems of the countries and of the banks.”

The stress tests are supposed to verify banks’ solidity, he added.

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

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