ECB's Gonzalez-Paramo: April rate hike possible

By @ibtimes on

An April rate increase is possible as the European Central Bank continues its mission to control inflation, ECB Executive Board member Jose Manuel Gonzalez-Paramo said in an interview published on Sunday.

It's not about responding to higher oil prices, but about preventing a second round of effects, Gonzalez-Paramo told Spanish newspaper El Mundo, echoing comments made last week by ECB President Jean-Claude Trichet.

Asked about the impact of a rate hike for Spain, whose economy is recovering at a slower pace than others in the euro zone, Gonzalez-Paramo said the ECB must think about the euro zone as a whole rather than individual countries.

If the ECB was devoted to countries with slower recoveries, it would not be able to ensure price stability over the medium term, he said.

Regarding the European rescue fund, Gonzalez-Paramo said the fund must be large enough and flexible enough to act as a market deterrent and guarantee stability.

It's not about a specific country, but the systemic effect. But using the rescue fund should not be an attractive option, he said.

Spain has been in markets' sights since Ireland was forced to take an international bailout late last year, largely because of problems with its savings banks since a burst property bubble.

Gonzalez-Paramo applauded recent reforms introduced by the government to shore up banks' capital, but said the country still had to define a future business model for the sector.

(Reporting by Tracy Rucinski; Editing by Daniel Magnowski)

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