Bloomberg News

Finland Wants Bigger ECB Role as Euro Rescue Plan Option

December 01, 2011

(Updates with comments from Swedish Finance Minister Borg starting in sixth paragraph.)

Dec. 1 (Bloomberg) -- Finland wants to include a bigger role for the European Central Bank in the toolkit of options available to the euro region to help end its debt crisis, Finance Minister Jutta Urpilainen said.

“If there’s nothing else left on the table and we’re still in crisis, then I’m ready to think about strengthening the role of the ECB,” Urpilainen said in an interview in Brussels yesterday. “I prefer strengthening the role of the International Monetary Fund.”

The ECB, the Federal Reserve and four other central banks yesterday made it cheaper for banks to borrow dollars in a coordinated action to stem the global turmoil. While the move may help ease tensions in money markets, it doesn’t address some calls for the ECB to take on a lender-of-last-resort role, a move advocated by Nobel Laureate Paul Krugman.

The ECB has resisted the calls, arguing that such monetary financing would spur inflation. Urpilainen said her preferred model for tackling Europe’s debt crisis is giving a more active role to the IMF. Euro-area finance ministers’ focus on continued talks over the IMF’s role was a “good decision,” she said.

The ECB has argued that its mandate is to ensure price stability in the euro region, and that its actions should always have that goal without coming under pressure from governments to delve into measures that support fiscal strength.

Inflation Mandate

Swedish Finance Minister Anders Borg said that, given stable inflation expectations, and “if we would see further measures to stabilize fiscal policy, then obviously that would open up room to maneuver for the ECB,” in an interview in Brussels yesterday. “Many member states realize that this is one of the ways forward that could be promising, but there needs then to be further delivery from particularly the Italian government. It is an option that is obviously on the table.”

Borg also underlined the need to involve the IMF in any European rescue scenario. Sweden hasn’t adopted the euro.

“It’s crucial to mention the IMF,” he said. “The IMF has both the resources but also the surveillance capacity so if we could see further steps from Italy and also some assessment from the IMF, obviously that would increase the room for the ECB to act without jeopardizing price stability and the inflation level in the eurozone.”

--With assistance from Rebecca Christie and Josiane Kremer in Brussels. Editors: Tasneem Brogger, Jonas Bergman.

To contact the reporters on this story: Nejra Cehic in Brussels at ncehic@bloomberg.net; Kati Pohjanpalo at kpohjanpalo@bloomberg.net.

To contact the editor responsible for this story: Jonas Bergman in Stockholm at jbergman@bloomberg.net


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