SARRIA, Spain (MNI) – The euro is stable and credible, and
inflation expectations remain well anchored, European Central Bank
Executive Board member Jose Manuel Gonzalez-Paramo said late Friday.

Speaking at an event in this lesser-known corner of Spain, Paramo
called the euro “a stable, credible and global currency…that bestows
numerous benefits on its members, especially during the profound current
economic and financial crisis.”

It “has protected all the member countries during the crisis and
has contributed to the maintenance of financial stability,” he stressed.

“The people believe” that Europe’s monetary authorities will
accomplish their inflation-fighting mandate, he said, pointing to
“inflation expectations in the long term solidly anchored at levels
compatible with price stability.”

“The solid economic fundamentals of the eurozone and the absence of
imbalances are an asset for the future,” Paramo asserted.

“The euro is not in crisis, the euro was a good idea,” he affirmed.
The problem is instead the “lack of commitment of national policies to
the demands of the euro” and the weakness or even absence of “an
effective framework of coordination of fiscal policies and macroeconomic
policies.”

“We have to improve the system of economic governance of the
Eurozone,” he insisted.

“The recent financial market tensions are due to the lack of
confidence in the commitment of governments” to meet fiscal challenges,
he said, calling it “essential that countries adopt credible plans of
budget adjustment to safeguard the confidence of citizens in the
long-term sustainability of public finances.”

However, the Eurozone’s aggregate fiscal condition is still better
than that of Japan or the U.S., he added.

There is “no room for complacency” against the backdrop of a
situation in which “the attention of the financial markets is centered
on the valuation of the solvency risks of some countries of the
Eurozone,” Paramo said.

Complacency would be wrong even if “the tensions in the public debt
markets have diminished somewhat,” he said.

It would thus be “desirable to implement more ambitious reforms”
than those put forth by the commission headed by European Council
President Herman Van Rompuy, he said.

In other comments, Paramo said the recent banking system stress
tests had “mitigated the uncertainty” regarding Europe’s banks.

–Frankfurt bureau tel.: +49-69-720142. Email: dbarwick@marketnews.com

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