HELSINKI—The euro zone's economic crisis is over and it is now enjoying a broad-based recovery, Bank of France Governor Christian Noyer said Monday.
"There are increasing signs that the economic recovery is on track," Mr. Noyer told a financial markets conference, pointing to a "brilliant" first quarter and strong business sentiment indicators. He added that he considered that financial conditions are now "favorable" and that there is no sign of credit rationing as demand for funds improves. "All in all, we have strong reasons to believe that we successfully exited the economic crisis."
However, he acknowledged that some leading indicators appear "to have peaked at high levels" and that the recovery may slow in the coming quarters. Mr. Noyer, who is also a member of the European Central Bank's governing council, said the need to reduce indebtedness will probably weigh on the region's growth "in the medium term."
The ECB's governing council holds its monthly policy-setting meeting on Thursday, and many economists expect it to signal a rise in interest rates at July's meeting. Mr. Noyer said the ECB would act "as forcefully as necessary to defend price stability" but said his comments weren't intended to prejudice that meeting.
The Bank of France governor said nothing specific about the possibility of a second, extended rescue plan for Greece, warning only that those countries that have agreed assistance programs with official lenders such as the European Union and the International Monetary Fund have to stick to them.
"Solutions akin to debt restructuring are not an option," Mr. Noyer said. He stressed that the experience of countries in eastern Europe showed that austerity programs can work, and singled out Spain for praise for its performance in 2010: exports from Spain to the euro area rose 10% last year, while its exports to the rest of the world rose 19%.
Mr. Noyer also argued that the risks of the sovereign-debt crisis to the banking sector, especially in France, were overstated, noting that total exposure of French banks to the periphery of the euro zone was only 38% of their Tier 1 capital, or only 13% excluding Italy.
Source: http://online.wsj.com
"There are increasing signs that the economic recovery is on track," Mr. Noyer told a financial markets conference, pointing to a "brilliant" first quarter and strong business sentiment indicators. He added that he considered that financial conditions are now "favorable" and that there is no sign of credit rationing as demand for funds improves. "All in all, we have strong reasons to believe that we successfully exited the economic crisis."
However, he acknowledged that some leading indicators appear "to have peaked at high levels" and that the recovery may slow in the coming quarters. Mr. Noyer, who is also a member of the European Central Bank's governing council, said the need to reduce indebtedness will probably weigh on the region's growth "in the medium term."
The ECB's governing council holds its monthly policy-setting meeting on Thursday, and many economists expect it to signal a rise in interest rates at July's meeting. Mr. Noyer said the ECB would act "as forcefully as necessary to defend price stability" but said his comments weren't intended to prejudice that meeting.
The Bank of France governor said nothing specific about the possibility of a second, extended rescue plan for Greece, warning only that those countries that have agreed assistance programs with official lenders such as the European Union and the International Monetary Fund have to stick to them.
"Solutions akin to debt restructuring are not an option," Mr. Noyer said. He stressed that the experience of countries in eastern Europe showed that austerity programs can work, and singled out Spain for praise for its performance in 2010: exports from Spain to the euro area rose 10% last year, while its exports to the rest of the world rose 19%.
Mr. Noyer also argued that the risks of the sovereign-debt crisis to the banking sector, especially in France, were overstated, noting that total exposure of French banks to the periphery of the euro zone was only 38% of their Tier 1 capital, or only 13% excluding Italy.
Source: http://online.wsj.com
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