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FRANKFURT (MNI) – Global payments imbalances are a major problem
that, if not fixed, can lead to currency wars and protectionism,
European Central Bank Governing Council member Marko Kranjec said in an
interview published Tuesday by a Slovenian business journal.

“Global economic imbalances among the leading countries in the
world are a very strong economic and political problem,” Kranjec told
the online publication Finance.si. “If at the international level we do
not reach agreement on balancing the global balance of payments
surpluses and deficits, there can be trade protectionism and currency
wars.”

He added: “We live in precarious conditions and there can also
occur any unpleasant incident.”

But Kranjec, who heads the Slovenian central bank, seemed
relatively optimistic about the state of the economy both globally and
in Europe.

“Economic indicators that we currently possess, together with the
international institutions EU, OECD and the IMF, suggest that the
economic situation in the world and in Europe is stabilizing,” he said.
“The world has solid economic growth, but it is uneven,” he added,
noting that growth has weaker in developed countries and in the more
highly indebted ones and stronger in emerging market countries and in
those with relatively lower debt loads.

Kranjec also categorically ruled out a break up of the Eurozone
despite the current pressures caused by the sovereign debt crisis. Asked
if the euro would survive as a global currency, he replied “absolutely.”
And countries cannot leave the euro area, he said, because “entry into
the Eurozone is irrevocable. There is no mechanism to withdraw from the
area.”

While the situations in some individual EMU countries have been
“unstable,” the emergency measures taken by the Eurozone and EU in
Greece and now Ireland show “a clear intention to stabilize the euro
area,” he said. He added that he would not rule out the possibility that
“speculative investors” were beyond some of the widening in spreads on
the sovereign debt of certain EMU countries.

Kranjec said that adopting the euro has been “very useful” for
Slovenia. He said it helped maintain financial stability through the
crisis, because with the euro foreign creditors had more confidence and
didn’t pull out as quickly as they did from other eastern and central
European countries such as the Baltic states, Hungary and the Ukraine.

Kranjec also said the Slovenia’s banks have emerged from the crisis
in good shape. “With us there was no bank in an emergency situation that
[needed to] recapitalize overnight,” he said.

–Frankfurt Newsroom, +49-69-720-142; dbarwick@marketnews.com

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