A permanent fix to Europe's debt crisis requires a timely exit from temporary monetary measures, European Central Bank Governing Council member Erkki Liikanen said on Thursday, putting the onus on governments to restore market confidence.
Central bank measures can be used to calm the financial markets, but a permanent solution to the debt crisis will require both successful fiscal and structural policies and a controlled and timely exit from the temporary central bank measures, Liikanen, who also heads the Bank of Finland, said in a quarterly report.
Liikanen said the ECB's twin refinancing operations which injected a trillion euros into the region's banks have had a decisive impact and posed no threat to price stability. Markets and economic data have stabilised in early 2012, he said.
He also forecast euro-area inflation will continue to be above 2 percent this year.
Over the policy-relevant medium term, inflation risks remain balanced and inflation expectations firmly anchored, he said.
(Reporting by Terhi Kinnunen and Ritsuko Ando; Editing by Toby Chopra)