Connect to share and comment

Former ECB chief economist sees no deflationary risks

PlacardEnlarge
(Globalpost/GlobalPost)

FRANKFURT (Reuters) - The former chief economist of the European Central Bank, Juergen Stark, sees no risks of deflation in the euro zone after inflation slowed to an almost four-year low in October and sparked calls for the ECB to cut interest rates further.

The ECB Governing Council will meet on Thursday to set the monetary policy for the euro zone. It is expected to resist the pressure and leave interest rates on hold.

Stark, who resigned in 2011 in protest of the ECB's intervention in the government bond markets, told a conference on Tuesday he saw no dangers of deflation or inflation in the euro zone at the moment.

"Monetary policy has to be forward looking," Stark said. "I do not see acute deflationary dangers, but also no inflationary dangers."

The ECB is getting ready to take on an additional task from November next year as banking supervisor as part of a broader push for closer integration in Europe to avert future crisis.

As part of its preparations, it will put the euro zone's largest lenders through a painstaking assessment to reveal potential risks on their balance sheets.

When asked how large he thought banks' capital needs would be as a result of the checks, Stark said: "I hope that it will remain at a double-digit billion euro sum."

Europe should have run such checks five years ago, in the wake of the collapse of U.S. investment bank Lehman Brothers, Stark said.

(Reporting by Eva Taylor)

http://www.globalpost.com/dispatch/news/thomson-reuters/131105/former-ecb-chief-economist-sees-no-deflationary-risks