–ECB Bank Supervision Not Realistic Until Start-2014
–Talk Of Delaying Basel III Implementation ‘Concerning’

FRANKFURT (MNI) – Fears of higher Eurozone inflation stemming from
the European Central Bank’s monetary policy are baseless, ECB Executive
Board member Joerg Asmussen said Thursday, adding that expectations
remain well-anchored and inflation should fall below 2% next year.

Speaking in Berlin, Asmussen once again assured that “the euro is
irreversible. For this we will do everything that is necessary within
our mandate.”

Asmussen stressed that the ECB’s traditional interest rate lever
has become “relatively ineffective” and that non-standard monetary
policy measures were needed to repair the monetary transmission
mechanism and secure price stability in the Eurozone.

Asmussen said he was aware that the ECB’s aggressive actions mean
“inflation fears are being expressed in connection with the bond buying
program, or alternatively with the very low interest rate. I assure you:
These worries are baseless.”

“On our current projections, inflation in the Eurozone will be
below 2% next year. More importantly, the inflation expectations for the
Eurozone are solidly anchored.”

Asumussen said economic projections for Germany next year, together
with the state of its state finances, showed the outlook for Germany is
“certainly not rosy, but robust.”

He also reiterated that while many EMU members – including
peripheral members – had made progress in reducing their budget deficits
and restoring competitiveness, more needs to be done.

Asmussen stressed that “in the Eurozone, necessary economy
adjustments will not take place via the easy route of inflation, but
through the hard route of reforms.”

On regulation, Asmussen echoed other ECB officials in pushing back
to 2014 the timing for the central bank to fully adopt its new role of
Eurozone bank supervisor, stressing the need for adequate preparation
and implementation.

“Realistically, I expect that the European bank supervisor will not
begin its full work before the start of 2014,” Asmussen said,
reiterating that effective supervision was only possible in conjunction
with a common bank resolution authority.

Asmussen also warned against re-starting a debate on either side of
the Atlantic over the merits of Basel III, and he urged that the new
bank capital standards be implemented as planned by the start of 2013.

“What in recent days has been heard coming from the United States,
and the attempts to swim in the same waters in this country and to
re-open the debate, are concerning,” Asmussen said. The need to
strengthen bank resilience “has lost none of its relevance or
correctness” since the onset of the 2008 crisis, he added.

— Frankfurt bureau: +49 69 720 142; email: ccermak@mni-news.com

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