FRANKFURT (MNI) – The European Central Bank has delivered on its
price stability mandate, which has been a “cornerstone” of its efforts
to mitigate the ongoing sovereign debt crisis in the Eurozone, ECB
Executive Board member Peter Praet said Wednesday.

Praet said the central bank’s actions had also succeeded in
preventing downside inflation risks. Citing the ECB’s various standard
and non-standard measures during the crisis, Praet said price stability
has always been the focus.

The ECB’s “full operational independence and the clear orientation
of its price stability mandate have been crucial cornerstones in guiding
these interventions,” Praet said in prepared remarks to a Bundesbank
symposium in Frankfurt.

“Despite the challenges that several countries in EMU are currently
facing, it is important to emphasize that the ECB has delivered on its
price stability mandate,” he said. “Moreover, the ECB has contributed to
averting acute downside risk to inflation during the crisis, which would
also have impacted adversely on economic stability.”

Praet warned that a central bank could never take for granted the
public’s trust in its ability to keep the value of money stable.
Policymakers “can never assure that trust that has been acquired…is
going to be maintained,” he said. “Trust is based on the quality of
institutions.”

But Praet also argued that the crisis has made clear that
independent central banking is not sufficient to maintain a stable
currency. Reforms to the EMU’s governance structure are key to putting
the euro’s soundness beyond doubt.

The causes of the crisis “clearly demonstrate that an independent
central bank with a clear price stability objective is a necessary but
not sufficient condition to preserve trust in a currency,” he said.

Praet said the ECB backs efforts to reform the EMU architecture:
“In fact, I am convinced a swift and determined implementation of these
reforms will put the soundness of our common currency beyond doubt.”

— Frankfurt bureau: +49 69 720 142; email: ccermak@mni-news.com

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