–Adds Comments On The Economy, Liquidity Policy, Market Normalization

MALAGA, Spain (MNI) – The European Central Bank has started to
normalize its monetary policy but at this point official interest rates
remain very accommodative, ECB Executive Board member Jose Manuel
Gonzalez-Paramo said Monday.

Speaking at the university here in a ceremony granting him an
honorary doctorate, Gonzalez-Paramo indicated that the crisis was far
from over.

The ECB has started to raise borrowing costs to a more normal
level, he said, “despite which, short-term interest rates continue to be
very accommodative,” he said.

“Despite the signs of recovery, the crisis is continuing and its
end will not occur soon,” he predicted.

Gonzalez-Paramo noted that the data have confirmed for several
quarters now that the Eurozone is no longer in a freefall.

“The combination of extraordinary monetary and fiscal stimuli, the
unlimited provision of liquidity by the central banks and the government
measures directed to reinforcing the balance sheets of credit entities,
are contributing in an effective way to the recovery,” he said. “This is
especially true in Europe, although in some countries, including ours,
the crisis continues to show its worst side.”

He noted that “in the majority of European economies,” though
“unfortunately not yet in the Spanish economy,” credit is already
growing and the markets have normalized — with the exception of
sovereign debt in the European periphery.

Gonzalez-Paramo reiterated that the current crisis is one of
confidence in the financial markets, related to the fiscal policies of
several countries.

“Making public finances sound is necessary and urgent to protect
the sustainability in the long term and to guarantee confidence, a
prerequisite to grow again and create jobs,” he said.

He said that monetary policy has “already initiated the process of
normalization in the Eurozone, despite which the short-term interest
rates continue to be very accommodative.”

He added: “A good part of the extraordinary liquidity measures has
already been withdrawn, although some operations of liquidity provision
are being maintained at a fixed interest rate.”

–Frankfurt bureau tel.: +49-69-720142. Email: dbarwick@marketnews.com

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