Sept. 23 (Bloomberg) -- The European Central Bank may act
to address risks to growth as soon as next month should economic
data disappoint, Governing Council member Luc Coene said.
“The ECB has never ruled out things beforehand,” Coene,
who heads the Belgian central bank, said in an interview in
Washington late yesterday when asked if an interest-rate cut
were warranted. “If the data in early October shows that things
are worse than we anticipated we will look at the kind of
decisions we have to take for that.”
European policy makers have come under pressure from
counterparts around the world as a failure to contain the
region’s sovereign-debt crisis stokes concern the world is on
the brink of another recession. Economists at Barclays Capital
and Royal Bank of Scotland Plc predict the ECB will reverse the
two rate increases it implemented earlier this year.
Potential measures by the ECB include the reintroduction of
longer-term bank loans, with maturities of 12 months or even
longer, Coene said. He added that cutting the benchmark rate
“certainly would not help” in bringing down longer-term rates.
“We could perfectly do that when we feel there is an urgent
need for that -- I don’t think so for the moment, but it could
be in two weeks,” Coene said, referring to the ECB extending
long-term bank loans. The ECB is scheduled to meet Oct. 6. The
benchmark rate is currently 1.5 percent, compared with near-zero
for the U.S. Federal Reserve and Bank of Japan, and the Bank of
England’s 0.5 percent.
G-20 Pledge
Coene was in Washington for annual meetings of the
International Monetary Fund and World Bank. Finance chiefs from
the Group of 20 pledged in a joint statement late yesterday a
“strong and coordinated international response to address the
renewed challenges facing the global economy.”
Many G-20 members pressed Europeans to follow through on a
July pledge to expand the powers of the region’s rescue fund,
Japanese Finance Minister Jun Azumi told reporters.
Euro-area services and manufacturing shrank for the first
time in more than two years in September, a survey of purchasing
managers showed this week, deepening concern that Europe may
return to a recession.
Coene signaled reluctance to step up the central bank’s
government bond purchase program even after the IMF said Sept.
20 the ECB “must continue to intervene strongly” in European
debt markets to “maintain orderly conditions.”
Temporary Measure
“I think it has been a helpful element in the beginning
but of course it cannot be a structural element of the system,”
the Belgian central banker said. “The main reason was that we
wanted to keep the transmission of monetary policy as good as
possible until the moment that the EFSF will be able to take
over” the bond buying, he said, referring to the European
Financial Stability Facility.
So far, six governments have ratified the upgrade of the
440 billion-euro ($595.41 billion) EFSF.
The ECB was forced to restart the purchases last month
after governments failed to convince investors they can solve
the crisis which, according to a research paper published by the
ECB this week, is putting the survival of the euro at risk. ECB
Executive Board member Juergen Stark, a co-author of that paper,
resigned this month to protest the bond purchases.
Coene indicated he opposes a proposal to turn the EFSF into
a bank that can refinance itself at the ECB in order to boost
its firepower.
“I’m not sure that will be a good idea,” he said. “If
they do it at market conditions, fine, but once we are in a
variable rate system then it is going to be at the market
conditions -- then there is not going to be a guarantee” that
they will get preferable rates, he said.
Coene also said that Dexia SA, the Paris and Brussels-based
lender to local governments that was bailed out in 2008, is “not
in trouble,” and hasn’t sought dollars from the ECB in a “long
time.” Dexia last month reported the largest quarterly loss in
its history because of provisions to sell assets and a writedown
of Greek debt, bringing shareholder equity to a two-year low.
to address risks to growth as soon as next month should economic
data disappoint, Governing Council member Luc Coene said.
“The ECB has never ruled out things beforehand,” Coene,
who heads the Belgian central bank, said in an interview in
Washington late yesterday when asked if an interest-rate cut
were warranted. “If the data in early October shows that things
are worse than we anticipated we will look at the kind of
decisions we have to take for that.”
European policy makers have come under pressure from
counterparts around the world as a failure to contain the
region’s sovereign-debt crisis stokes concern the world is on
the brink of another recession. Economists at Barclays Capital
and Royal Bank of Scotland Plc predict the ECB will reverse the
two rate increases it implemented earlier this year.
Potential measures by the ECB include the reintroduction of
longer-term bank loans, with maturities of 12 months or even
longer, Coene said. He added that cutting the benchmark rate
“certainly would not help” in bringing down longer-term rates.
“We could perfectly do that when we feel there is an urgent
need for that -- I don’t think so for the moment, but it could
be in two weeks,” Coene said, referring to the ECB extending
long-term bank loans. The ECB is scheduled to meet Oct. 6. The
benchmark rate is currently 1.5 percent, compared with near-zero
for the U.S. Federal Reserve and Bank of Japan, and the Bank of
England’s 0.5 percent.
G-20 Pledge
Coene was in Washington for annual meetings of the
International Monetary Fund and World Bank. Finance chiefs from
the Group of 20 pledged in a joint statement late yesterday a
“strong and coordinated international response to address the
renewed challenges facing the global economy.”
Many G-20 members pressed Europeans to follow through on a
July pledge to expand the powers of the region’s rescue fund,
Japanese Finance Minister Jun Azumi told reporters.
Euro-area services and manufacturing shrank for the first
time in more than two years in September, a survey of purchasing
managers showed this week, deepening concern that Europe may
return to a recession.
Coene signaled reluctance to step up the central bank’s
government bond purchase program even after the IMF said Sept.
20 the ECB “must continue to intervene strongly” in European
debt markets to “maintain orderly conditions.”
Temporary Measure
“I think it has been a helpful element in the beginning
but of course it cannot be a structural element of the system,”
the Belgian central banker said. “The main reason was that we
wanted to keep the transmission of monetary policy as good as
possible until the moment that the EFSF will be able to take
over” the bond buying, he said, referring to the European
Financial Stability Facility.
So far, six governments have ratified the upgrade of the
440 billion-euro ($595.41 billion) EFSF.
The ECB was forced to restart the purchases last month
after governments failed to convince investors they can solve
the crisis which, according to a research paper published by the
ECB this week, is putting the survival of the euro at risk. ECB
Executive Board member Juergen Stark, a co-author of that paper,
resigned this month to protest the bond purchases.
Coene indicated he opposes a proposal to turn the EFSF into
a bank that can refinance itself at the ECB in order to boost
its firepower.
“I’m not sure that will be a good idea,” he said. “If
they do it at market conditions, fine, but once we are in a
variable rate system then it is going to be at the market
conditions -- then there is not going to be a guarantee” that
they will get preferable rates, he said.
Coene also said that Dexia SA, the Paris and Brussels-based
lender to local governments that was bailed out in 2008, is “not
in trouble,” and hasn’t sought dollars from the ECB in a “long
time.” Dexia last month reported the largest quarterly loss in
its history because of provisions to sell assets and a writedown
of Greek debt, bringing shareholder equity to a two-year low.
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