TOKYO (MNI) – European Central Bank Governing Council member
Christian Noyer on Monday defended the role Europe’s single currency has
played in prompting growth and putting inflation under control in the
region, saying it would not be in the interest of any of the Eurozone
members to question its status.

He also told a seminar here that overall public financing is better
in the Eurozone than in the U.S.

The current financial crisis hitting Europe “is simply not a crisis
of euro,” he said, adding that “it is a classical sovereign debt
crisis,” blaming the global financial crisis and recession.

“It would be in no country’s interest, none of the 16 countries’
interest, to put that remarkable achievement into question. So putting
the euro into question is simply and will remain totally off the table,”
Noyer said.

He also said there is no need to have any doubt about the financial
rescue plans for Ireland and Greece.

“The overall public financing situation of the Eurozone is
significantly in better shape than that of many countries around the
world, and that does include the United States,” he concluded.

In his speech, Noyer, who is also the governor of the Banque de
France, said market volatility in general “may not necessarily be a bad
thing. To some extent, it is a sign of well functioning financial
markets.”

Capital inflows to emerging economies partly reflect “very
favorable long term growth prospects and high potential returns on
capital,” he said.

Meanwhile, he warned that commodities have become an asset class in
themselves “which warrants special attention in terms of financial
stability.”

“Volatility becomes a problem when it is policy induced and,
therefore, financial markets contribute to aggravating shocks instead of
attenuating them. Then, durable instability settles in and creates
potential threats for the real economy.”

Efforts by the Group of 20 advanced and emerging economies to
rebalance global demand helped restore confidence during the latest
global financial crisis but “this concerted approach to global
imbalances may have weakened recently,” said Noyer.

“In advanced economies, monetary easing, together with inhibitions
on credit growth, creates a potential for further financial imbalances,”
Noyer said, urging those economies to boost credit growth while
increasing the resilience of the financial sector.

“In many emerging countries, inflationary pressures would warrant
monetary tightening but there is a clear risk this would trigger
destabilizing capital inflows,” he said.

Measures to stabilize capital inflows among emerging economies “may
help and relieve the pressure on domestic financial conditions and
prevent further asset bubbles,” he added.

tokyo@marketnews.com
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