(Corrects to clarify Belka did not mention Latvian
devaluation when discussing potential contagion)
WARSAW, June 5 (Reuters) - The following are comments from
policymakers at an economic conference in Poland on Friday
attended by European Central Bank President Jean-Claude Trichet
and other European Union central bank officials.
ECB EXECUTIVE BOARD MEMBER JUERGEN STARK
On euro zone rules:
"It is absolutely inappropriate to change the rules of the
game as is sometimes requested by some observers who consider
this as a quick fix or bypassing for different reasons problems
some countries are facing at present."
On crisis:
"It is not surprising at all that those countries that are
hit hardest by the crisis are those with large imbalances and
vulnerabilities in the past. This has often been the result of
unsustainable policies and lack of progress in regards to
structural reforms."
"Due to the overheating of the domestic economies...
countries operating under fixed exchange rate regimes underwent
strong losses in competitiveness. On the contrary, countries
with flexible exchange rate regimes, like Poland, were in a
better position to avoid such imbalances in the past, and they
also seem to have absorbed the crisis troubles."
IMF EUROPE DEPARTMENT HEAD MAREK BELKA
On Latvian budget proposals:
"What the Latvian government has proposed so far is a step
in the right direction, but more additional resources may be
needed. This should be addressed on both the revenue and
spending sides."
"It is very important to ensure protection for the poorest.
We are not proposing spending cuts across the board."
On Latvia's currency peg:
"The peg, on one hand, is a barrier, because it limits the
possibilities of economic policy. On the other hand, it offers
protection from negative balance sheet effects. So there is not
a clear answer as to whether the peg is good or bad, but the peg
is a symbol of economic stability."
On a contagion risk from Latvian situation:
"There may be a slight reaction in the region's markets, but
I don't think there will be contagion as such. Poland is a
country that has much stronger fundamentals."
On the global economy:
"Green shoots are definitely visible in Asia with a visible
recovery after the Chinese applied a huge internal economic
impulse in the form, for example, of investments.
When it comes to Europe and the United States, you can see
some green shoots on the stock exchanges for example or in some
confidence indicators, but in real economic data, things are
still not looking too good."
"There is no hard evidence that there is a recovery. Growth
in the second and third quarters could still be negative."
"We expect that the European economy will have a positive
growth indicator at the start of 2010."
EU MONETARY AFFAIRS COMMISSIONER JOAQUIN ALMUNIA
"Beyond the current short-term liquidity risks, the region
(eastern Europe) is also likely to face more difficult and
volatile funding conditions in the coming period."
On Global economy:
"We have the feeling that things are improving (in the
global economy), slowly but improving. It is less difficult than
two months ago."
On Latvia:
"I have informed (Polish Finance) Minister Rostowski what we
are doing from the Commission point of view to monitor the
situation (in Latvia) and trying to avoid the negative
spillover."
On Poland:
"I was concerned when I received information about the Polish
fiscal situation."
EBRD CHIEF ECONOMIST ERIK BERGLOF
"The capital will be more expensive in the (Central and
eastern European) region for the foreseeable future."
"Even if the... crisis goes away very fast, it leaves a
legacy for many years. At least four or five years in terms of
the cost of capital for these countries."
CZECH CENTRAL BANK GOVERNOR ZDENEK TUMA
On growth:
The process of (economic) shrinking is close to the end...
next year we expect we can be growing moderately. Our forecast
is for slightly more than 1 percent.
On rates
"Our rate is at 1.5 percent. We see this as balanced,
considering our forecasts. The next move... will depend on how
the economy evolves in the next few months. Maybe we will raise,
or maybe we will cut. Both options are possible."
On Latvia:
"The region is heterogeneous. The situation in Poland and
the Czech Republic is different, and I am not overly worried
about a possible spillover effect from Latvia.
ECB PRESIDENT JEAN-CLAUDE TRICHET
On Poland:
"The fact that the impact of the global financial crisis has
been considerably less pronounced in Poland as compared to its
regional peers, might have various reasons. The most important
one, in my view, is that Poland has built up less of
macroeconomic imbalances and that it has implemented a set of
policies and reforms that have overall been appropriate in
recent years."
On price stability:
"The Governing council made always clear that we would not
compromise -- in any respect -- the loner term achievement of
the price stability objective or encourage or tolerate imprudent
behaviour by market participants."
"Measures have been taken in full consistency with our
monetary policy framework and our primary objective of
maintaining price stability. The crisis has not changed this
objective. In contrast, the fundamental principle on which our
actions were based on is that any course of policy --
conventional or unconventional -- should be firmly grounded on
and directed to the achievement of the Eurosystem's primary
objective of maintaining price stability over the medium term."
On liquidity measures:
"While long-term inflation expectations continue to remain
broadly anchored at levels consistent with price stability, our
measures show some signs of revival in the functioning of money
markets in Europe."
"Once the macroeconomic environment improves, the Governing
Council will ensure that the measures taken can be quickly
unwound and the liquidity provided absorbed. Hence, any threat
to price stability over the medium term and longer term will be
effectively countered in a timely fashion."
"I observe, in particular, that the concentration of our
non-standard measures on the supply of liquidity, with full
allotment, to banks, provides for an in-built exit strategy...
This will be a decisive element in ensuring a non-inflationary
recovery in the euro area."
On Poland's euro aspirations:
"For the governing council of the ECB, what counts are the
criteria. You know that we are attached to the criteria that are
in the treaty. We consider that they have to be met."
POLISH MPC MEMBER DARIUSZ FILAR
"There is a threat that the situation in Latvia may spill
over onto the region, although different markets may react
differently.
"This situation is a challenge that requires a reaction on a
broader scale than just Latvia, there is a need for more
international assistance."
SERBIAN CENTRAL BANK GOVERNOR RADOVAN JELASIC
"Definitely there is strong willingness in the central bank
to lower further the reference rate but we're concerned about A
more and higher than planned increase of regulated prices."
"We're aware on the other hand that most of the measures the
government is taking as part of the IMF arrangement, freezing
wages...,freezing pensions..., cutting budgetary expenditures
are going to contract substantially demand, mainly in the second
half of this year."
"The future development of the reference rate is going to
depend on inflation, inflationary expectations and once more on
those two major things, on one hand regulated prices, and on the
other hand how fast the contraction of the local demand has
deflationary impact on the prices."
On GDP forecasts
"The IMF is talking about minus 2 (percent GDP). We
definitely see that there is a substantial risk that contraction
will be even higher than minus 2. Definitely there is downward
risk to this growth. "
"(The scenario of 5-6 pct contraction) is unlikely but it's
possible. Definitely scenarios (speaking of) between 5 and 6
(percent) contraction have very low probability."
On Latvia:
"(The situation in Latvia will) not directly (impact Serbia)
as we have a floating exchange rate which is definitely proving
as a very valuable asset in these turbulent times."
(Reporting by Karolina Slowikowska)
