By Steven K. Beckner

TOKYO (MNI) – The European Central Bank’s plan to buy sovereign
debt of Euro-zone nations is “an important step” in resolving the
continent’s economic and financial problems but more needs to be done,
according to Swedish Finance Minister Anders Borg.

A similar view was expressed by Belgian Finance Minister Steven

Beyond Europe, “the global economic recovery is at risk,” said Borg
at the annual meetings of the IMF and World Bank.

Borg, speaking on behalf of Denmark, Norway and other Nordic
nations in a statement to the IMF’s policymaking International Monetary
and Financial Committee, said “important steps have been taken in Europe
to tackle the crisis and strengthen the framework for economic policy
cooperation, but challenges still remain, including with respect to
implementation of agreed measures and policies.”

Borg welcomed the fact that the European Stability Mechanism will
soon be fully operational with the first two tranches of capital already
paid in. And he hailed the ECB’s so-called Outright Monetary
Transactions scheme.

That program of sovereign bond buying “to safeguard the
transmission of monetary policy through the euro area, subject to strict
and effective conditionality, is also an important step in dealing with
the crisis,” he said. But he said more work is needed on a common
European approach to banking supervision.

Borg said “the crisis in the euro area weighs on activity and
output has weakened also elsewhere,” and he added, “high unemployment in
many parts of the world brings huge costs to individuals and societies.”

Meanwhile, addressing the IMFC on behalf of a group of nations that
includes Austria, Turkey and others, Vanackere also welcomed the new
euro area bailout fund and ECB bond buying plan.

“Financial solidarity within the Euro area is being enhanced,” he
said, noting that the effective lending capacity of the European
Financial Stability Fund (EFSF) “has been increased to 440 billion euro
and its instruments for interventions broadened.”

Vanackere added that “the permanent successor of the EFSF, the ESM
has been ratified by all 17 Euro area member countries and became
effective on September 22, 2012; it has a lending capacity of 500
billion euro. It is now the main instrument for financing adjustment
programs of Euro area countries.”

As for the ECB’s Outright Monetary Transactions Program (OMT),
Vanackere said it “will help stabilize financial markets by securing a
correct functioning of the monetary transmission mechanism and combating
the fragmentation in Euro area financial markets.”

“The OMT will provide credible backstopping for sovereign bond
markets and help removing unfounded fears and tail risks in the
financial markets,” he said. “It will help stabilizing conditions in
other markets, such as those for corporate and bank bonds.”

“This will feed into more equal borrowing costs for the real
economy across the euro area,” Vanackere continued.

But he cautioned that “this new instrument of the ECB, the OMT,
will only be successful if countries vigorously and credibly address the
underlying economic and financial imbalances, if banks are put on a
sound footing and adopt viable business models and when reforms provide
confidence about regaining external competitiveness, output growth and

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