BRUSSELS (MNI) – The decisions taken by Europe’s governments to
combat the sovereign debt crisis could provide a basis for the European
Central Bank to continue its stabilisation work, European Commissioner
for Economic and Monetary Affairs, Olli Rehn, said on Wednesday.

In a speech entitled “Building Europe’s Economic Future,” Rehn said
that Europe’s politicians and the Commission needed to work “in all
policy areas and with ever stronger sense of urgency and determination.”

He said the politicians had taken action including an E85 billion
rescue deal for Ireland, a European Stabilisation Mechanism which will
see the private sector involved in sovereign debt insolvencies after
mid-2013, fiscal consolidation plans from high debt and deficit
countries, and a fresh round of bank stress tests, due next year.

“Altogether, these measures could provide a sound basis for the
continuation of actions of stabilisation by the ECB, which has played a
key role in ensuring financial stability in the euro area, for instance
last May,” Rehn said.

“While the recent decisions proved the resolve of the EU, we are
fully aware that this is not yet enough to restore confidence,” Rehn
added. “The challenges to financial stability of the euro area have
certain system features, which require a systemic response.”

In May, the ECB launched its securities markets programme (SMP)
which allows it to buy government bonds on the markets as a means to aid
cash-strapped Eurozone governments. The programme is due to be discussed
Thursday at the ECB Governing Council’s monthly meeting amid speculation
that the central bank could announce an increase in the scope of its
bond buying. It was reported to be buying heavily on Tuesday and
Wednesday.

The ECB is at pains to stress that the SMP isn’t quantitative
easing and won’t have an impact on monetary conditions because the bond
buys will be sterilised.

“We shall do what it takes to safeguard financial stability in
Europe,” Rehn said.

“As always and especially after a deep financial crisis restoring
confidence takes time and we need consistent and determined action on
all fronts to this effect. We know that and we shall do that,” he added.

The Commissioner said Portugal and Spain “have taken the right
decisions for bold fiscal consolidation, and their budgetary strategies
are on track.”

“Furthermore, they have announced and are going to announce
important decisions, on structural reforms that will lift economic
growth and help create jobs,” Rehn added.

–Brussels: 0032 487 (0) 32 803 665, echarlton@marketnews.com

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