–Updates the story transmitted at 01:33 ET

PARIS (MNI) – European Central Bank Governing Council member Yves
Mersch on Wednesday sought to downplay the danger of contagion from the
Ireland crisis, saying that financial markets could ascertain the
differences among EMU countries.

“Markets are able to assess the difference from one country to
another,” Mersch said in an interview with CNBC Europe, a small excerpt
of which was played moments ago.

“A question that is being asked is whether [the crisis] will spill
over into the whole region, and if I look at the markets there are
differences in bond yields. In some cases bond yields are extremely
low,” he said, noting that this would not be the case if the crisis were
affecting the Eurozone as a whole.

Mersch, asked about the future of the ECB’s sovereign bond-purchase
program, known as the Securities Market Program (SMP), noted that the
environment today was much more secure than when the program was
launched in May at the height of the sovereign debt crisis.

He observed that at the time, the ECB was acting in the absence of
any institutional crisis resolution mechanism and that since then, the
European Financial Stability Facility has been created, Greece has been
rescued and Ireland is now next in line for help.

“So we are in a wholly different environment now than we were when
this mechanism of SMP was set up, and we have to take into consideration
this change,” he said.

“But this does not mean that the SMP will have to be swept
altogether, only it is not at the present moment in the same functioning
mode as it has been six months ago.”

In the debate over economic governance, in which the ECB has
criticized EU leaders for not proposing stringent-enough rule changes,
Mersch expressed optimism that the European Parliament would come
through with sufficiently strengthened measures.

He noted that the Parliament had played “a very important role in
strengthening” macro-economic surveillance. “So why would we at the
outset be negative and not expect that the European Parliament would
again come up with a very responsible attitude towards economic
governance and that we would have a strengthened procedure not only for
the 3% [of GDP] deficit [rule] … but also to strengthen macro-economic
surveillance, which is insufficient inside Europe?”

He added: “Inside a currency union, we need to go in that way, and
we cannot leave all the responsibility to the private markets.”

–Paris newsroom, +331-42-71-55-40; bwolfson@marketnews.com

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