–Adds Additional Comments, Quotes, Details

BRUSSELS (MNI) – The European Central Bank’s monetary policy will
remain supportive as long as Eurozone economic growth is depressed and
inflation risks remain low, Vitor Constancio, the ECB’s vice president
designate, said Tuesday.

Constancio, who heads the Bank of Portugal and therefore already
sits on the ECB’s Governing Council, said stimulus measures had helped
the Eurozone economy through the crisis and “the fact that they are now
gradually withdrawn will not by itself create a double dip (recession).”

Monetary policy, he said, could provide more support to the economy
by keeping borrowing costs low.

“As long as we have a depressed economy” and as long as there’s no
risk from inflation “then of course monetary policy will continue to
have that role,” Constancio said.

The single currency area could see “a protracted period of slow
growth and severe unemployment,” Constancio told lawmakers in the
European Parliament, who will vote later Tuesday on his bid to become
the next ECB vice president.

Constancio also criticised ratings agencies and traders of credit
default swaps for their part in the economic crisis, saying ratings
agencies in particular, “played a very negative role.”

He said the EU’s rules on financial supervision needed to be
tightened because “low inflation in the market for goods and services is
not enough to guarantee financial stability.”

But he said policymakers needed to tread carefully when putting the
new rules in place, because he saw “a risk to be avoided concerning the
timing of implementation.”

“An immediate or quick implementation of all the measures,
particularly those on capital requirements, could generate credit supply
restrictions detrimental to economic recovery,” he said.

Constancio has been chosen by European finance ministers to take
over from current ECB Vice President Lucas Papademos when his term ends
at the end of May this year.

If Constancio’s candidacy is approved by the European Parliament
Tuesday and later by EU leaders, he will take up the position June 1.

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

[TOPICS: MT$$$$,M$$FX$,M$$EC$,M$X$$$,M$$CR$]