VIENNA: Stable prices and functioning financial markets are the keys to the European Central Bank eventually launching a gradual exit from crisis-fighting mode and it has many tools it can use to carry out the process, policymaker Ewald Nowotny said on Thursday.
In an interview on Thursday, Nowotny said the economic picture in Europe was set to improve in the second half of the year as stronger countries in the north help offset weaker ones in the south.
He indicated monetary policy was on hold for now as the ECB gauges the impact of its two rounds of cheap three-year financing, while the danger that wage increases lock in an inflationary spiral - so-called second round effects - remained limited.
Nowotny, an Austrian member of the ECB's policy-setting governing council, said the central bank was discussing ways of withdrawing extraordinary measures such as the ultra-cheap tenders of three-year funds that helped boost market sentiment.
"There is an arsenal of potential measures and what to use has to be decided when the time comes...This is not something that can be concentrated at one single point of time but this is a gradual approach," he said, declining to go into more detail.
He gave no specific timetable for when the time would be right to start weaning markets from special support, but said:
"For the ECB the main compass always is to maintain price stability. That is our primary goal and main orientation.
The second point is of course to have an efficient functioning of capital and money markets, and in this context these are the orientation lines along which we go," he said.
Nowotny said the economic divide between northern and southern Europe was set to persist, but on balance the situation would improve as the year went on.
"We do think that especially the economies of Germany, the Netherlands, also Austria as well as the economies of central and Eastern Europe have a more positive tendency," he said.
"On the other hand we see that there is still a very difficult time ahead for some of the southern countries. But in the second half of this year the net effect should be a positive one," Nowotny said.
indiatimes.com
In an interview on Thursday, Nowotny said the economic picture in Europe was set to improve in the second half of the year as stronger countries in the north help offset weaker ones in the south.
He indicated monetary policy was on hold for now as the ECB gauges the impact of its two rounds of cheap three-year financing, while the danger that wage increases lock in an inflationary spiral - so-called second round effects - remained limited.
Nowotny, an Austrian member of the ECB's policy-setting governing council, said the central bank was discussing ways of withdrawing extraordinary measures such as the ultra-cheap tenders of three-year funds that helped boost market sentiment.
"There is an arsenal of potential measures and what to use has to be decided when the time comes...This is not something that can be concentrated at one single point of time but this is a gradual approach," he said, declining to go into more detail.
He gave no specific timetable for when the time would be right to start weaning markets from special support, but said:
"For the ECB the main compass always is to maintain price stability. That is our primary goal and main orientation.
The second point is of course to have an efficient functioning of capital and money markets, and in this context these are the orientation lines along which we go," he said.
Nowotny said the economic divide between northern and southern Europe was set to persist, but on balance the situation would improve as the year went on.
"We do think that especially the economies of Germany, the Netherlands, also Austria as well as the economies of central and Eastern Europe have a more positive tendency," he said.
"On the other hand we see that there is still a very difficult time ahead for some of the southern countries. But in the second half of this year the net effect should be a positive one," Nowotny said.
indiatimes.com
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