MNI:ECB Villeroy suggests a "Stabilisation Lending Instrument"

By Christian Vits

     BRUSSELS (MNI) - European Central Bank Governing Council member Francois

Villeroy de Galhau Thursday suggested a "Stabilisation Lending Instrument" to

stabilise the euro area's economy and to better shield it against asymmetric

economic shocks.

     "The SLI would provide loans to euro area Member States faced with an

asymmetric economic shock, in order to support their countercyclical policies,"

Villeroy said in a speech in Brussels. "The SLI would be a complement to and not

a substitute for national stabilisers," he added.

     The instrument would help Member States to not abandon long-term

investments, "especially by preventing an unwarranted widening of their

financing conditions," Villeroy stressed.

     Looking beyond this instrument, the creation of a "rainy day fund" with

fiscal resources within a euro area budget would only be considered "at a later

stage" once confidence and economic convergence between member states have

increased, he noted.

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--MNI Frankfurt Bureau; +49 69 97782671; email: christian.vits@marketnews.com