–Adds comments on euro, derivatives, reforms, economic governance

MALAGA, Spain (MNI) – The European Central Bank stands ready to
provide assistance to the banking system should the results of stress
tests show there is such a need, ECB Executive Board member Jose Manuel
Gonzalez Paramo said here today.

However, such need would be systemic and not on an individual bank
basis, he stressed.

Paramo characterized the publication of stress test results in
Europe as a “positive” development and said the ECB would coordinate the
presentation of results for European banks.

Asked whether Spain’s banks were overly dependent on financing from
the ECB, Paramo replied that he couldn’t say.

He acknowledged the challenges facing the Eurozone, saying “this is
a crucial moment in the history of the euro.” However, “the euro will
survive,” he declared. “All the measures taken these [past] years during
the crisis reflect the will for the euro to survive.”

He added: “We will leave this crisis reinforced and with better
governance for the euro. We should remember this when we are invaded by
pessimism.”

Any talk of leaving the euro is “absurd” and a “waste of time,” he
said.

He also said that the central bank “has never lost sight of the
fact that its objective is the control of inflation.”

Gonzalez Paramo also stressed that it is vital for Eurozone
governments to cut their budget deficits down to size, get their debt
under control and run more disciplined fiscal policies. Governments must
win back the confidence of markets.

“Although there are people who say that with fiscal [cutting]
measures you are cutting growth, the fact is that if the public sector
can’t finance itself, the outlook for growth will not be real,” he said.

He also urged greater regulation of derivatives trading.

In derivatives, “the value of transparency is fundamental,” he
said. “They should be standardized.”

Paramo noted that the ECB is withdrawing the liquidity created by
its bond purchases on a weekly basis, and he repeated that the bond buys
are intended “to restore the monetary policy transmission mechanism.”

“Doubts about public debt can only be dispelled by the
governments,” he said.

In addition to more disciplined fiscal policies, national
governments must work harder at economically transformative reforms and
must forge greater coordination to provide for more coherent economic
governance for the Eurozone.

“As far as reforms are concerned, there remains a lot to do and it
will be a difficult task,” Paramo said.

With regard to Spain, a lot of work remains to be done on labor
market reform, Paramo said. There must be a healthy adjustment of the
labor market – “which is not happening in Spain,” he said.

Spain’s government “has done a lot, but there’s still a lot to do,”
he said. “The reforms taken by the Spanish government are not enough
yet.”

He warned that, “governments that resist making adjustments and do
not provide transparency can end up being victims of a loss of
confidence, which could affect the real economy.”

In terms of greater coordination and economic governance, Paramo
said Europe is “taking giant strides.”

He added: “We are advancing towards federalism.”

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