–Adds Comments On Price Stability, Greece, Ireland, European Recovery

ROME (MNI) – Global leaders are engaged in a dialogue on foreign
exchange rates, not a “currency war” as some have argued, European
Central Bank Executive Board member Lorenzo Bini Smaghi said Thursday.

Speaking to reporters after an Aspen Institute conference here,
Bini Smaghi noted that at the annual meetings of the International
Monetary Fund and World Bank last weekend, “we discussed with major
actors ways to improve cooperation.”

The term “war,” he added, is “not an appropriate word to describe
the cooperation that has taken place…The concrete discussions show
that there are no currency wars.”

Bini Smaghi also expressed confidence that price stability has been
attained. “There is no risk of inflation, we don’t see it,” he asserted.
“And there is no risk of deflation at all.”

With regard to the debt crisis in the Eurozone’s periphery, Bini
Smaghi replied only indirectly to a question on whether the IMF should
prolong its loan package for Greece, saying only that the Greek
government must focus on “implementing the [austerity] program and
making sure all the conditions are met.”

With regard to Ireland, which has been in the market’s crosshairs
more recently, Bini Smaghi said, “we are confident they will implement
their budget for next year and we encourage them to do that quickly —
to draft a rigorous budget that will bring back the confidence of
markets.”

He said Europe’s economy is “recovering progressively in line with
our forecasts — with some uncertainties and some risks, but there is
nothing surprising. The picture is not changing for now.”

In his formal remarks earlier in the morning, Bini Smaghi warned
against “the illusion that this crisis is cyclical rather than
structural — that it has no impact on the long-term growth potential of
our economies.” To think that, he said, may mean that we are “deluding
ourselves that traditional monetary and fiscal policies are able to
restore growth. Thus there is a risk of triggering again unsustainable
policies which in turn create new imbalances but sooner or later
implode.”

He also cited the risk of being resigned to economic stagnation by
assuming that politicians in the developed country democracies don’t
have the courage to take needed, but perhaps unpopular, measures.

“Contrary to what many believe, budgetary austerity and reform do
not penalize governments,” Bini Smaghi said. “This suggests that
political leaders who have the courage and ability to reconcile balanced
public finances with economic growth are rewarded over time.”

He also criticized “dangerous position” held by some that certain
emerging market nations are better able to manage the crisis, “because
they have stronger regimes which do not need to justify their actions
with the electorate.”

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