FOCUS-Issing says pressure on ECB not helpful
03:14 a.m. Nov 06, 1998 Eastern
FRANKFURT, Nov 6 (Reuters) - The chief economist of the
European Central Bank, Otmar Issing, said on Friday that political
pressure exerted on the ECB would not sway its policy and could
prove counterproductive.
''We are of course open to criticism...of course...there can be a debate
and criticism in internal meetings. But creating a public pressure is not
really helpful if you are interested in good results,'' Issing told The Wall
Street Journal Europe.
Both the Bundesbank and the ECB came under pressure recently from
the new German centre-left government, which has been calling for
monetary easing to stimulate the economy and create jobs.
Issing rejected politicians' suggestions that the ECB should follow the
example of the U.S. Federal Reserve and lower interest rates to lower
the unemployment rate.
''The comparison with the Fed is misleading because the environment
they are working in is different,'' Issing said.
He echoed comments by ECB President Wim Duisenberg and
Bundesbank head Hans Tietmeyer that Europe's high unemployment
had mainly structural roots.
One of the most vocal advocates of rate cuts, Finance Minister Oskar
Lafontaine attended Thursday's regular Bundesbank council meeting to
make his case but, as widely expected, left the meeting empty-handed.
Tietmeyer stressed after the meeting that even though central banks had
to be open for debate on policy, political pressure was unacceptable.
Issing suggested that politicians crusading for rate cuts were trying to
shift the blame for a possible failure of their policies.
''Politicians unable to do the structural reforms may try to blame the
monetary policy-makers for not doing their job. But that is just looking
for a scapegoat,'' Issing said.
However political pressure for rate cuts would not prevent the ECB
from monetary easing if it judged that economic conditions called for it,
he said.
Issing said the ECB remained relatively optimistic about the European
economic outlook.
''So far, despite a variety of bad news, growth in the euro area has
weakened somewhat but is still on a stable path. It's even somewhat
above potential growth. And it doesn't look so bad for next year
either.'' he said.
Issing said inflation in the euro zone remained well under control but the
central bank needed to remain vigilant.
''The price outlook in the euro area shows no inflationary danger. That
isn't to say it can't happen in the medium term. For central bankers
inflation is never really dead,'' he said.
Issing said he saw no imminent threat of deflation.
He said the ECB would reveal in December its new euro zone M3
money supply aggregate, which will be tailored to fit all European
monetary union members and would probably include money market
funds.
''It will be something like M3. But it may be broader than Germany's
M3 because it will probably include money market funds,'' Issing said.
He said that also in December, the ECB would publish a reference
value for its new broad money aggregate that would be in line with its
definition of price stability.
Issing echoed earlier ECB announcements that the new reference value
would not serve as a binding target for the ECB, which would also
track closely inflation and other indicators in its strategy.
Issing said one of the reasons behind the the ECB's strategy was that
the new indicator would lack sufficient history.
((Tomasz Janowski, Frankfurt Newsroom +49 69 756525,
frankfurt.newsroom+reuters.com))
Copyright 1998 Reuters Limited. All rights reserved.
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