ECB's Nowotny says QE risk-sharing was resolved well
VIENNA (Reuters) - How to share the risks of the European Central Bank's new asset-buying scheme was the subject of intense discussion but in the end the issue was resolved satisfactorily, ECB Governing Council member Ewald Nowotny said in an interview aired on Friday.
The ECB will bear 20 percent and national central banks in the euro zone 80 percent of risk from the programme announced on Thursday to pump more than 1 trillion euros into a sluggish economy and ward off deflation.
"I am also of the opinion that one has to pay great heed that it does not come to an undesirable distribution of risk," Nowotny told Austrian broadcaster ORF.
But he noted that the ECB will buy some state bonds directly and some will be bought from relatively safe multinational institutions like the European Investment Bank.
"Just this point was acutely controversial but was resolved well," he said.
He reiterated his stance that he thought the quantitative easing (QE) programme may be starting too early given that the ECB had already launched stimulus steps that should be given a chance to have an impact.
"To be honest I did not support this decision," he said. "I think of course it has advantages but the risks are not insignificant."
A cautious central banker had to see things from a medium-term perspective, he said, adding: "The bigger the volume, the greater the problems that can be linked to the side effects."
He acknowledged that inflation in the euro zone was too low,
posing a danger that this could lead to a protracted period of stagnation. But the question was to what extent monetary policy alone could remedy economic weakness.
"I too see the problem that if you add too much liquidity it can lead to side effects. We already see that there are negative interest rates in wide areas...That is certainly not a desirable long-term development and thus I personally am more on the cautious side."
(Reporting by Michael Shields; Editing by Shri Navaratnam and Dominic Evans)
