Top ECB official praises economic steps
THE Government is taking "the right steps" in cleaning up the banking system with the establishment of NAMA (National Asset Management Agency), a member of the Governing Council of the European Central Bank said yesterday.
Executive director Jose Manuel Gonzalez-Paramo said he believed the operations planned for NAMA were essential to clean the banks' balance sheets and prepare them for a future role in helping economic recovery.
This strong endorsement of the controversial "bad bank" will increase hopes that the EU Commission will soon give NAMA approval for the transfer of development loans from the banks to the agency.
"Measures to address the banking system problems are complex, very demanding and challenging, but in our view the right steps have been taken.
"Let us hope the Commission comes soon with its assessment and gives a green light to the proposals," he said.
He also said Ireland was going "in the right direction" with its measures to reduce budget deficits and restore competitiveness.
"The Irish measures are very courageous. They are going in the right direction.
As the ECB prepares to reduce its support for the banking system through extensive loans at low rates, Mr Gonzalez-Paramo said the central bank would take into account the state of vulnerable banking systems such as Ireland's.
There are fears of a rise in interest rates as the ECB limits its lending at low fixed rates and banks have to pay the variable rates imposed in the money markets for their short-term borrowings.
In his address to the Institute of International and European Affairs he said inadequate rules and regulations, and not financial integration, had not been the cause of the crisis, and the EU needed further integration, not less.