MNI INTERVIEW: Lagarde's ECB To Let Hawks Make Case: Holzmann

By Luke Heighton

     VIENNA(MNI) - The ECB under Christine Lagarde will be "open-minded," the

governor of the Austrian National Bank has told MNI in an interview, with the

new president potentially more receptive to Governing Council hawks than under

her predecessor, Mario Draghi.

     "Madame Lagarde came in with an open-minded style of discussion, which

definitely will help to find conclusions within the Governing Council on a broad

consensual basis," Robert Holzmann said. "We all have the same goals. Madame

Lagarde has an openness to hear dissenting voices and take them seriously."

     Holzmann, a vocal critic of the September decision to re-start the ECB's

asset purchase programme at the same time as cutting the interest rate on the

deposit facility to -0.5%, said it was time to "think about finding a way to

move out of negative territory, and to unwind the asset purchase program."

     "Negative nominal interest rates are difficult to handle in economics," he

explained, "because they make a number of our economic concepts unreal, or no

longer economically understandable. They may be useful for periods of heavy

macroeconomic shocks, but should be limited to a temporary period."

     --STRATEGY REVIEW

     Holzmann spoke to MNI on November 26th in his offices in Vienna. He said it

was "unlikely" there will be a change in eurozone monetary policy within the

next 12 months ("though nothing can be excluded"), unless the economic outlook

changed significantly.

     Any moves to alter the policy stance should be approached "very

cautiously," since doing so could have an impact on financial stability. "It

couldn't be done quickly," he added, "and it would have to be done with

sufficient guidance before any move could take place."

     With Lagarde expected soon to formally announce the beginning of a

strategic review of monetary policy, Holzmann - who has previously gone public

with his belief that the ECB should cut its mandated inflation target to around

1.5% - said he believed "everything should be up for discussion."

     "We haven't had some discussions yet, but I know that there is a lot of

interest in having broader discussion as on the 2% inflation target for

example."

     While the outcome of the review is difficult to predict, "the process

itself could have a positive effect because it will allow every member to

participate equally in the discussion."

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

[TOPICS: MT$$$$,MX$$$$]