Bloomberg News

Bank of Korea’s Kim Says Euro-Area Growth Outlook ‘Alarming’

April 16, 2012

Bank of Korea Governor Kim Choong- Soo said the “alarming” growth outlook in the euro area may be one reason why government bond yields in Spain and Italy are elevated.

While fiscal tightening may be needed in many countries, “consolidation may unfortunately bear fruit only after a long spell of painful economic contraction,” Kim said in a speech in Frankfurt today. “And it could even defeat its purposes, at least in the short run.”

Kim said unconventional central bank policy measures on both sides of the Atlantic have “been pivotal in calming the markets” and “bought us time for necessary fiscal adjustment.”

However, “the welcome role of these policies in crisis management is now rapidly approaching its limit,” he said. “Further monetary easing could do more harm than good when the financial markets are already flooded with cheap liquidity but remain nonetheless timid in their lending to the private sector.”

To contact the reporters on this story: Jeff Black in Frankfurt at jblack25@bloomberg.net; Joseph de Weck in Frankfurt at jdeweck@bloomberg.net

To contact the editor responsible for this story: Craig Stirling at cstirling1@bloomberg.net


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