(Reuters) - The euro's EUR= recent fall is bolstering the euro zone economy and this should show up in stronger growth next year, European Central Bank Governing Council member Ewald Nowotny said in a magazine interview.
Nowotny told Austria's Format magazine that it was questionable, however, whether economic growth rates would ever return to the levels of 3 and 4 percent seen before the Lehman Brothers bankruptcy that triggered the global financial crisis.
"The economy in the euro area is not yet in deflation but it is showing clear signs of weakening," Nowotny said in the interview released on Thursday. But he also noted the positive effect of a weakening currency.
"The current euro exchange rate is having an invigorating effect on the European economy. Hence, we can expect higher growth rates again in 2015," he added.
Turning to the ECB's plans to buy rebundled loans, known as asset-backed securities (ABS), Nowotny said he did not believe these purchases - due to begin in the fourth quarter - would begin before December.
Stressing that ABS is "not per se junk paper", or non-investment-grade debt, he said: "I am not in principle against ABS, but its quality is more important than the quantity." "One should therefore not commit to a particular volume of ABS purchases from the outset."
ECB President Mario Draghi has said the ABS purchases, together with the bank's plans to buy covered bonds and its issuance of new long-term loans to banks, should have a "significant" impact on the ECB's balance sheet and steer it back toward the size it had in early 2012.
The balance sheet, which now stands at around 2 trillion euros, briefly topped 3 trillion euros in early 2012. Nowotny said the ECB should avoid quantitative targets.
"I don't want to speculate about figures," he said when asked about the size of the ECB's purchase program. "In the markets, there have certainly been exaggerated ideas about the purchase volumes," he added.
"The ECB should not be driven by the markets and should not get involved with quantitative targets." The ECB's plans have drawn criticism from German officials including the head of the Bundesbank, the ECB's former chief economist and allies of Chancellor Angela Merkel.
Nowotny dismissed media reports of the ECB becoming a 'bad bank' due to the ABS purchases: "the 'bad bank' debate is only taking place in Germany and is excessive. It is scaremongering without foundation."
reuters.com
Nowotny told Austria's Format magazine that it was questionable, however, whether economic growth rates would ever return to the levels of 3 and 4 percent seen before the Lehman Brothers bankruptcy that triggered the global financial crisis.
"The economy in the euro area is not yet in deflation but it is showing clear signs of weakening," Nowotny said in the interview released on Thursday. But he also noted the positive effect of a weakening currency.
"The current euro exchange rate is having an invigorating effect on the European economy. Hence, we can expect higher growth rates again in 2015," he added.
Turning to the ECB's plans to buy rebundled loans, known as asset-backed securities (ABS), Nowotny said he did not believe these purchases - due to begin in the fourth quarter - would begin before December.
Stressing that ABS is "not per se junk paper", or non-investment-grade debt, he said: "I am not in principle against ABS, but its quality is more important than the quantity." "One should therefore not commit to a particular volume of ABS purchases from the outset."
ECB President Mario Draghi has said the ABS purchases, together with the bank's plans to buy covered bonds and its issuance of new long-term loans to banks, should have a "significant" impact on the ECB's balance sheet and steer it back toward the size it had in early 2012.
The balance sheet, which now stands at around 2 trillion euros, briefly topped 3 trillion euros in early 2012. Nowotny said the ECB should avoid quantitative targets.
"I don't want to speculate about figures," he said when asked about the size of the ECB's purchase program. "In the markets, there have certainly been exaggerated ideas about the purchase volumes," he added.
"The ECB should not be driven by the markets and should not get involved with quantitative targets." The ECB's plans have drawn criticism from German officials including the head of the Bundesbank, the ECB's former chief economist and allies of Chancellor Angela Merkel.
Nowotny dismissed media reports of the ECB becoming a 'bad bank' due to the ABS purchases: "the 'bad bank' debate is only taking place in Germany and is excessive. It is scaremongering without foundation."
reuters.com
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