VIENNA (MNI) – The question of whether or not a so-called Eurobond
should be issued warrants a closer examination, European Central Bank
Governing Council member Ewald Nowotny said Friday.

At a press conference at the Austrian National, which he heads,
Nowotny said Eurobonds could send a positive signal to European capital
markets, and added that investors would like to see a European
equivalent of U.S. Treasuries.

“While the ECB has no official position on the matter, I would
personally welcome it if the question of euro bonds was looked into more
closely,” he said.

Speaking on the non-standard liquidity measures put in place by the
ECB, Nowotny emphasized that these were not be compared to the U.S.
quantitative easing as they have “no influence on the money supply.”

The measures were put in place to “correct market irregularities”
and there would be no need for them once markets stabilized, he said.
The ECB measures should be seen as measures to “help [others] to help
themselves” and “cannot replace structural reforms.”

The current euro-dollar exchange rate is “alright” and those
concerned about “the current fluctuations of between 1.30 and about 1.38
should keep in mind that since the introduction of the euro, the rate
has fluctuated between 0.8 and 1.5.”

The notion of a possible rupture split in the monetary union was
“absurd,” he affirmed.

“Devaluations in the past were a short-term solution and not a
long-term solution,” he said. While “painful, structural reforms will
lead to improvements over the long-term.”

Nowotny pronounced himself optimistic about the success of these
reforms, stating that it was “in the interest of the countries
themselves to implement the reforms.”

While the world economy has “recovered from the financial crisis,
growth patterns remain varied,” Nowotny said. “The emerging markets are
the drivers of the world economy.”

Europe and countries such as the US should not see it as a “threat
when poor countries grow quickly,” he said in the context in particular
of rapid Chinese economic expansion. At the same time, he warned that
there were risks of emerging bubbles in China’s real estate and
investment market.

Turning to Europe, Nowotny noted the varied growth patterns here
and pointed out that Europe has “a set of problem countries” owing to
imbalances in the balance of payments and to budget deficits.

With regard to Ireland, Nowotny said that its budget problems were
at heart “a banking problem. Ireland is a competitive country and when
this problem is fixed, things will return to normal.”

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