MNI INTERVIEW: Slowdown May Persist, Says ECB's Hansson

--Trade Disputes, Doubts Over Fiscal Policy To Weigh On Eurozone

--May Be Too Early For ECB Monetary Policy Review

--TLTRO Terms May Not Be Announced In June

By Luke Heighton

     FRANKFURT(MNI) - Uncertainty caused by international trade disputes and

poor fiscal policy may mean the eurozone's economic slowdown continues into the

medium term, the governor of the Central Bank of Estonia told MNI, as he ruled

himself out of the race to succeed European Central Bank President Mario Draghi.

     "The jury is still out on whether the short-term softness will spill over

into the medium term, Ardo Hansson said in an interview in Frankfurt on March

21.

     "From the perspective of an investor, if you see a bit of uncertainty for a

month or even a few quarters you can handle it, but when you start seeing in so

many jurisdictions so many bad policies or protectionism, demonstrations or what

have you, it starts to undermine confidence.

     "In some countries domestic politics is creating uncertainty about future

economic policy, and that must weigh on investors, and maybe even on consumers.

The economy isn't made of rubber and perfectly resilient to any kind of abuse.

The message has to be that if you have unsound policies in many places then it

has to have an impact. Hopefully it will be a short-term impact, but we'll see."

     Hansson, who steps down as head of Eesti Pank when his term ends on June 6,

said it was "legitimate" to ask whether confidence in the ECB's ability to alter

inflation had been eroded, and that "holding on to the 2% target forever isn't

necessary". But, he added, "shifting around a lot isn't helpful. It's hard to

say what the new normal is going to be."

     Hansson said he was not opposed to calls for a systematic review of ECB

monetary policy strategy, though he queried the need to do so now. "One argument

would be to first complete the current cycle and return to normal and then once

you're back on track with your existing framework then you review. I think that

over time you should occasionally take a fresh perspective, but the timing might

be a bit early."

     --TLTROS

     The ECB's March decision to announce a third round of targeted longer-term

refinancing operations to begin in September was, in his opinion, more "a

backstop" aimed at preserving monetary transmission than a change to the policy

stance, allied to a desire to avoid the "bunching up" of banks TLTRO-II

repayments "and other funding arrangements clustered around the same moment."

     He also cautioned against assuming that the loans' exact terms, which he

expected to be "a bit less generous" than previously, will be announced in June.

"I don't know what's likely, but obviously we have to announce the precise terms

somewhat in advance of when the programme starts," he said.

     "We could get a lot of news in-between, so for us to now lock in every

detail in March wouldn't make any sense."

     Asked whether he would like to take over from ECB Mario Draghi when he

steps down later this year, Hansson replied: "It's not by any means my preferred

option. I have kids who I'd like to keep where they are right now. If I were in

a different personal situation then I might answer differently, but I don't see

it as something I want to do terribly much."

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

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