ECB's Mersch: EZ Slowdown No Surprise; German Pickup Possible

By Luke Heighton

     FRANKFURT (MNI) - The slowdown in the eurozone economy does not mean it

will slide into a recession, ECB Executive Board member Yves Mersch said in an

interview published Wednesday, while Germany's weak economic performance "is not

sufficient" to prompt a monetary policy response.

     But the unevenly-distributed economic fallout from Brexit is a "concern",

he added, with uncertainty having negative impacts "on all sectors of the

economy and on all countries."

     Here are the key points from his interview with Czech newspaper Hospodarske

noviny:

     --"What is currently happening to the [eurozone] economy is still broadly

in line with our baseline scenario," Mersch said. "We had already anticipated a

slowdown in growth when we announced these baselines. Now that the slowdown is

materializing, we do not have to take it into account for a second time in our

policy response. Fundamentals have not changed but political uncertainty has

increased."

     --Mersch was coy in his response to being asked if - in light of the recent

euro area slowdown - the ECB is reconsidering plans to end quantitative easing.

"If we identify a deviation, we analyse the reasons for it and the impact it is

likely to have on inflation. Let me remind you that our sole objective is to

maintain price stability."

     --The slowdown in the third quarter in Germany "was mainly caused by the

automotive industry," Mersch said, "which was affected by the diesel scandal and

related aspects. But a slowdown in one quarter in one country is not sufficient

to prompt a monetary policy response at the euro area level. We would have to

see whether a slightly deeper slowdown in one quarter might not be followed by a

slightly better performance in the following quarter."

--MNI Frankfurt Bureau; +49-69-720-146; email: luke.heighton@marketnews.com

--MNI London Bureau; +44 203 865 3829; email: jason.webb@marketnews.com

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