FRANKFURT (MNI) – Price stability in the Eurozone is assured, thus
strengthening the purchasing power of private households, European
Central Bank Executive Board member Gertrude Tumpel-Gugerell said
Thursday.

Price stability is and will remain the main focus of the ECB’s
monetary policy, Tumpel-Gugerell asserted in remarks prepared for
delivery in Mainz, Germany and provided in advance by the bank.

Tumpel-Gugerell also cautioned against complacency in the effort to
strengthen economic governance and financial stability in the single
currency area.

She repeated the argument made by many of her colleagues that the
agreement reached under European Council President Herman Van Rompuy
last October does not go far enough in toughening the single currency’s
fiscal rules.

Though some voices have suggested the contrary recently,
Tumpel-Gugerell stressed that, “price stability remains guaranteed over
the medium term, through which the buying power of private households in
the Eurozone is retained.”

Tumpel-Gugerell also cited an increase in Eurozone money market
activity and improved financing conditions. Improvements in private
income and business balance sheets “support the positive outlook for
Eurozone growth, even against the backdrop of additional budget
consolidation efforts from Eurozone governments.”

“Price stability is and remains the main goal of our monetary
policy,” Gugerell said. “With that we create a necessary but indeed not
a sufficient requirement for financial stability,” she explained.

Countries such as Greece and Ireland have lost considerable
credibility in economic policy, she conceded, but suggested that the
loan programs from the EU and the IMF as well as tough conditionality
should counteract this effect.

While the ECB and the existence of the euro mitigate some of the
effects of the crisis, “it cannot only be the task of the ECB and the
shared currency to guarantee the stability of the Eurozone,” she
intoned.

Rather, progress in fiscal policy, economic policy that encourages
growth and competitiveness, and strengthened financial regulation and
oversight are all essential, she argued.

In some Eurozone states, economic reforms are needed to promote
lasting growth and employment. “The Eurozone cannot accept 10%
unemployment,” she urged.

Tumpel-Gugerell argued that the euro has proven itself as the
“motor” of European integration, noting that its success has prompted
new states to join the club, which formed with eleven members on January
1, 1999. This year, Estonia became the 17th member state. “And the
process of expansion in the Eurozone will continue,” she insisted.

Countries wanting to adopt the euro will have an even stronger body
to join, she suggested:

“I am convinced that Europe is undertaking the necessary steps and
that the euro will continue its success story in the future, as there
are no alternatives to a stable euro and a stability-oriented monetary
policy.”

–Frankfurt bureau, +49-69-720142, tbuell@marketnews.com

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