–Updates With Comments on Inflation, Banking Supervision

FRANKFURT (MNI) – The European Central Bank’s sovereign debt
purchases will not lead to inflation, ECB Executive Board member Joerg
Asmussen said in an interview with German radio station hr-iNFO released
Wednesday.

“I do not think this will lead to inflation,” Asmussen said in the
interview, which will be broadcast later this evening, noting that the
so-called OMT program’s purchases will be sterilized and therefore not
lead to an increase in the money supply.

“I am strongly convinced that what we have decided, namely to
buy government bonds under strict conditions, is within the realm of our
mandate, namely ensuring price stability across the entire Eurozone,”
Asmussen said.

Asmussen noted that “since the inception of the euro, inflation in
the Eurozone has always been around 2%, which is our price stability
target,” though he acknowledged that inflation sometimes feels higher in
Germany because of the rising costs of daily goods such as fuel and
food.

Asmussen reiterated that the ECB’s looming banking supervision role
“must be very clearly separated” from monetary policy, and stressed that
the ECB would begin supervision when it has “all instruments” for
effective supervision at its disposal.

“I think we should move forward as quickly as possible,” in
particular with setting the legal foundation for ECB supervision, which
Asmussen said should be in place by the end of the year.

After that, “what counts is thoroughness before speed,” he said,
arguing the ECB would only take operational control of banking
supervision once it can be fully effective.

In excerpts released earlier Wednesday, Asmussen he shared many of
the Bundesbank’s concerns about the European Central Bank’s new
bond-buying program, but that he believed it was still the right move
for the Eurozone.

Asmussen maintained he still had a “good working relationship” with
Bundesbank head and ECB Governing Council member Jens Weidmann.

“I share many of the concerns against the bond-buy program that
Jens Weidmann has but in the end – weighing all the arguments for and
against – come to the decision that I believe bond buys under strict
economic-political conditions are right for the Eurozone as a whole,”
Asmussen said in the interview.

Asmussen also said it was critical for investor confidence that the
Eurozone develop a clear plan for what the currency bloc will look like
in 10 years time.

“If we can’t resolve this, then no investor in New York, Hong Kong
or Singapore will buy a 10-year bond from us. We must resolve this. I
also don’t think it is impossible to make progress on this,” he said.

Asmussen offered support for German Finance Minister Wolfgang
Schaeuble’s proposals for EU members to hand more fiscal sovereignty
over to the EU, arguing a European monetary affairs commissioner should
have the right to veto budget proposals from members.

The interview will be broadcast on hr-iNFO at 1735 GMT Wednesday.

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

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