ECB’S Kranjec says economy stabilized, euro to survive

LJUBLJANA (BestGrowthStock) – Europe and the world’s economic situation has stabilized and the euro will see off the current debt crisis, European Central Bank Governing Council member Marko Kranjec was on Tuesday quoted as saying.

He said he did not expect a wider banking crisis in the euro area although some members “have problems” in their banking systems.

He also pointed to global imbalances between leading world economies as “a very big economic and political problem.”

“If an international agreement on balancing global current account surpluses and deficits is not reached, trade protectionism and currency wars can start,” Kranjec told Slovenian daily Finance in an interview published on Tuesday.

When asked, he said the euro will “surely” survive and added that joining the euro is irrevocable as “there is no mechanism on exiting this area.”

Kranjec, who is also the governor of the Slovenian central bank, said indicators show that the economic situation globally and in Europe has stabilized.

However, growth is weak in developed and more indebted countries while relatively fast in developing and less indebted countries, increasing global imbalances.

SLOVENIA DEBT

Kranjec said he was worried by a jump in Slovenia’s public debt following the global crisis, saying the country’s public finance position could become unsustainable if the government was unable to reduce debt due to low economic growth.

Slovenia’s general government debt is one of the euro zone’s lowest but it rose to 35.4 percent of gross domestic product (GDP) in 2009 from 22.5 percent in 2008 and is seen at 37.9 percent this year.

He also said the government was wrong in saying that the stability of the Slovenian banking system was ensured by the majority domestic ownership of the country’s largest bank Nova Ljubljanska Banka (NLB).

“That is not true. The Bank of Slovenia as supervisor and regulator cares for the stability of the banking system regardless of whether NLB is in domestic or foreign ownership,” said Kranjec.

Slovenia’s government said in October it plans to raise its stake in NLB to over 50 percent in order to ensure banking system stability. The government controls some 48.6 percent of NLB at present, while Belgian banking and insurance group KBC (KBC.BR: ) has 30.6 percent.

Kranjec also said the government has to make it clear to KBC and other potential foreign investors what stake in NLB could be available to them rather than negotiating with them without giving them clear information on what the state wants.

(Reporting by Marja Novak; editing by Patrick Graham)

ECB’S Kranjec says economy stabilized, euro to survive