MADRID (MNI) – The purchases of sovereign debt and the provision of
long-term liquidity by the European Central Bank have had a beneficial
impact from the standpoint of Eurozone stability, ECB Governing Council
member Luis Linde said Tuesday.

Linde, the new governor of the Bank of Spain, told the Spanish
parliament’s Committee of Economy and Competitiveness that “it must be
noted that an important part of the task of stabilization in the euro
area has fallen to the European Central Bank, with conventional monetary
policy measures as well as with non-conventional measures to purchase
sovereign debt of member countries.”

Making his first appearance before the committee since his
appointment, Linde said that “there exists a debate about the conduct of
the ECB, whether or not it has been sufficiently resolute or expansive.”
But he said “one must acknowledge that its provision of long-term
liquidity and its purchases of debt have been positive measures.”

The debt crisis has become “cause for concern and a risk factor for
the global economy,” even as “in the countries affected by the most
serious tensions (Greece, Portugal, Ireland), ambitious programs of
fiscal consolidation and reform have been launched,” he said.

Linde said that Spain should continue to pursue “an ambitious
process of fiscal consolidation and public saving; progress in a number
of reforms that improve the efficiency and competition in the sectors
least exposed to this; and, of course, the sanitizing and reform of our
banking system and its regulation.”

The Bank of Spain sees domestic growth contracting this year by
1.5%, he said, adding however that this was the symptom of a needed
adjustment by the economy.

At the end of 2012 Spanish inflation would be “rather favorable,”
he said, with lower labor costs leading to improved competitiveness.

Linde said that the core of the Spanish banking system was
“fundamentally healthy.” He added that “I am sure that soon, as the
program in course is put into effect, our banks will pursue their
activity with the solvency and vitality necessary to fulfill their
principle mission: efficiently intermediate financial flows and
contribute to the growth of the economy.”

–Frankfurt bureau tel: +49-69-720-142. Email: dbarwick@marketnews.com

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