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By Luke Heighton
     VIENNA (MNI) - Raising key eurozone interest rates poses little risk to
financial stability, the governor of the central bank of Austria said Monday.
     Here are key points from Ewald Nowotny's speech on fostering closer
economic integration between Central, Eastern and Southeastern Europe (CESEE) in
     -- "To my mind, the normalisation of the eurosystem's monetary policy -
which also includes future raising of interest rates - poses little risk to
financial stability, both with regard to the euro area and with regard to the
CESEE region"
     -- "Given the reasonably robust economic recovery, a well-communicated and
predictable exit might even benefit the financial structures of countries
concerned, and thus the long-term growth perspectives," he said. "The
alternative, market interest rates that stay low for a very long time, might
even impair financial stability."
     -- Economic cycles in euro area countries "are converging", but the gap in
income levels has widened following the financial crisis. The EU's regional
policies therefore need to be "upgraded" to target skills, innovation and
vulnerable regions, and seek synergies with private investment flows.
     -- EU funding can help EU Member States "align their economic performance
and thus stand united. After all, cohesion and convergence form the cornerstone
of European integration," Nowotny added.
     -- He called for a further deepening of Economic and Monetary Union, while
stressing both how "cumbersome" the process of process of economic and political
integration has been "and yet, how easy it is to undo its achievements."
     -- Discussing the global financial crisis, Nowotny said: "Today we can
truly say that all the efforts undertaken to prevent the worst from happening
have succeeded in the end. Initially, coordinate monetary and fiscal expansion
on a global scale was instrumental in avoiding economic meltdown of the kind
experienced during the Great Depression [...] Yet there is no reason for
complacency. High global debt, large global imbalances, a weaker post-crisis
growth path, pending monetary policy normalisation and remaining EMU
imperfections pose challenges that will have to be tackled, to say nothing of
the political risks exemplified by Brexit."
--MNI Frankfurt Bureau; +49-69-720-146; email:
--MNI London Bureau; +44 203 865 3829; email:
[TOPICS: M$E$$$,M$X$$$,M$$EC$]