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sábado, 13 de febrero de 2016

Coeuré (ECB) considers necessary to keep rates low in the euro area

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The French member of the executive committee of the European Central Bank (ECB), Benoît Coeuré, said today that the aim of the institution is not that the current phase of low interest rates become normal, but stressed the need to keep the interest rates at low level to raise inflation and protect recovery.

In an interview with the German newspaper "Rheinische Post" he said that low interest rates will remain "long enough", that is, until the inflation rate is closer to the target of 2%.

As noted, there are new downside risks, mainly by the fall in oil prices and the reduction of global growth, which is added to the volatility in financial markets in recent days.

"If this continues for too long, can increase the risk of a delay in the increase in inflation", he said recalling that the ECB will present its new projections in March.

His advice to the governments of the euro area is to use the savings being achieved by the low cost of debt on growth-enhancing measures, such as cuts in taxes on labor income, incentives for private investment or deficit reduction if required.

Asked whether the ECB is willing to a more expansionary policy to prevent a possible deflation, he insists that depend on the overall development.

"If necessary we are ready to use all instruments at our disposal," including interest rates  policy and the size, composition and duration of asset purchases, says Coure to emphasize that a decision will be taken into March.

Stop using that expansionary monetary policy, he added, requires national policies that support growth; "If that does not happen, we will have to keep rates low for a long time."

Coeuré relates widespread stock market declines of the last few days to several factors, such as investor concerns to a slowing global economy, especially in China, the uncertainty about the impact of low oil prices and questions about the profitability of the banking sector.

In his view, European banks are in a "much better" position than during the height of the debt crisis-in 2011 and 2012 and the challenge now is to address low profitability, also related to the current level of growth.

He also did not forget that there are banks with a high level of arrears inherited from the crisis, but pointed out that all these problems have been identified and he considers that what is required is "decisive action" to solve them.

Noting that the euro zone is growing between 1% and 1.5%, helping the banking recovery, he rule out a new financial crisis if that path is maintained.

Before the case of Greece, Coeuré calls on the country to meet its commitments for the third package of aid and to avoid any inclusion of the refugee crisis in the debate.

"It is in the interest of Greek that its economy strengthens, regardless of the question of refugees. For example, the country should, in any event, ensure the sustainable reform of its pension system.

"Experts from the European Commission, the ECB and the International Monetary Fund (IMF) has had productive talks in Athens, but we are not yet where we want to be," he says.

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