CB Governor cautious on EU government’s action to curb excessive budgets

Speaking to reporters on the sidelines of a Eurofi financial forum event, Michael Bonello – who is also an ECB member stressed that:  “countries are taking determined action to deal with budget problems although it is too early to say whether they will suffice.”

He said ECB interest rates were appropriate at 1 percent and added that forecasts for an uneven recovery in the 16-country region remained valid.

Bonello also said it was too early to say if steps taken by Ireland and Portugal, which Portugal proposed new austerity measures on Wednesday after European Union pressure, would prove to be sufficient.

"There's no way to tell a priori what is enough. The important thing is that the problems have been recognized and they are being addressed with a considerable amount of determination, given the difficult circumstances," Bonello said.

“Widening spreads on euro zone sovereign bonds were a reflection of market behavior and it was important to look at the longer term.”

He added: "the important thing is that policymakers are dealing with situations now and I think that should be a source of encouragement, that there is clear recognition of the problems and measures are being introduced to address them," Bonello said.

"We have had them in some countries in the past few days and no doubt there will be others coming, but these things need time," Bonello stressed.