PARIS (MNI) – Money markets in the Eurozone are returning to
normal, and leaving non-standard liquidity measures in place for too
long could interfere with that process, ECB Executive Board member
Juergen Stark warned in an interview with a Portuguese newspaper to be
published Wednesday.
The ECB is starting to “see clear signs of reactivation and
normalization of the money markets,” the central bank’s chief
economist told Jornal de Negocios in an excerpt of the interview
published on its website.
“Banks are trusting each other more,” he noted. However,
“to maintain these [extra liquidity] instruments for longer than is
necessary will impede the normalization of markets that is already
happening,” he warned.
In a comment that the newspaper interpreted as aimed at the U.S.
Federal Reserve, which is mulling the possibility of more quantitative
easing, Stark highlighted the dangers of the high volume of liquidity
already in the global system.
“There is a risk that the ample liquidity still available worldwide
could generate defensive reactions in some countries, such as the
capital controls that we are already seeing,” he warned. This, he
added, could “be the starting point of a protectionist spiral.”
–Paris newsroom, +331-42-71-55-40; bwolfson@marketnews.com
[TOPICS: M$$EC$,MT$$$$,M$X$$$,M$$CR$,MGX$$$]
