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By David Barwick

BASEL, Switzerland (MNI) – Europe’s leaders took the right
decisions last weekend in deciding to extend financial assistance to
Ireland and set up a permanent stability mechanism, European Central
Bank Governing Council member Nout Wellink told Market News
International on Tuesday.

The head of the Dutch National Bank, speaking on the margins of
Basel Committee meetings, said that markets had not yet grasped the
courage shown by Ireland, which should be lauded for its willingness to
adopt radical measures despite a 10% reduction in real income over the
last two years.

Wellink stressed the positive aspect of what some decry as a
“two-speed” Europe, predicting that relatively rapid German growth would
ultimately exert a positive impact on other European economies.

“They took the right decisions and one should not underestimate
what the Irish themselves are doing at the moment,” he said of the
decisions announced Sunday evening by European leaders.

Given that the Irish package amounts to some 10% of GDP even as
real income has suffered a double-digit blow since 2008, “I think we
should praise them and not blame them at this very moment,” he said.
“The Irish package is a courageous package and I think the European
leaders did the right thing.”

Financial markets, which greeted the announcements yesterday with
widening spreads and a further decline of the euro, “do not fully
understand how courageous a program it is,” Wellink added.

Wellink rejected speculation as to whether investors would now take
aim at another Eurozone country such as Portugal or Spain, saying that
“we should realize that the Irish case is completely different from the
Spanish case and the Portuguese case. And the same holds for the Greek
case. So we should look at the individual countries and assess the
situations in these countries, and I think for the moment we did the
right thing.”

Asked whether he was nonetheless concerned about increasingly
evident cracks in the European foundation as German economic growth
leaves many other Eurozone members further behind, Wellink said such
developments can be seen more positively.

“The fact that Germany is growing so fast will have a positive
impact on the rest of Europe, because Germany will function more or less
as a locomotive, as it did in the past, for other European countries,”
he said. “So initially you will see a widening of growth rate spreads,
but ultimately I think it’s in the interest of all of us that there is a
group of strong European countries.”

Wellink rejected the notion that even under his scenario, a single
monetary policy might not be appropriate in Europe.

“That also holds, for example, for the United States,” he said. “If
the Fed in New York is increasing interest rates it also influences the
situation in California, but nobody’s talking about that.”

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

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