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By Luke Heighton
     FRANKFURT (MNI) - Targeted longer-term refinancing operations (TLTROs) are
one of "a large range of tools" at the European Central Bank's disposal,
Vice-President Luis de Guindos said in an interview with Le Monde published
     A decision on whether to use TLROs will be taken only after the ECB has
conducted a "thorough analysis" of the reasons behind the eurozone's faltering
growth, De Guindos said. But his remarks came shortly after ECB Chief Economist
Peter Praet said the Governing Council would use March's monetary policy meeting
in Frankfurt to assess "the current and expected state of bank transmission."
     Here are the key points from De Guindos interview, which was conducted on
February 13:
     - The ECB is sufficiently well-equipped to deal with a slowing eurozone
economy, De Guindos said, with "a large range of tools at its disposal,
including advance communication about its strategy (forward guidance),
reinvesting the debt securities it holds as they mature, and targeted lending to
banks - the TLTROs." He said that "(W)e are currently analysing the causes of
the economic slowdown in Europe, some of which are temporary," but added "we
will not take a decision until we have conducted a thorough analysis."
     - The current economic slowdown "is as much the result of international
factors, which have weighed on exports - the slowdown of the global and Chinese
economies, the risks of protectionism, market volatility, difficulties in some
emerging markets - as it is the result of internal factors, like the uncertainty
surrounding Brexit and the tensions over the Italian budget at the end of last
year," he said.
     - A disorderly Brexit, De Guindos said, "would represent a significant
macroeconomic shock at a time when the European economy is already weakened. The
UK's GDP could shrink by up to 8%, according to the Bank of England. This would
naturally affect the euro area economy."
     - Low unemployment and increasing employee compensation meant the ECB is
"confident" that inflation with will pick up "within a few months or quarters,"
De Guindos said. "Even if energy prices were to fall a little in the coming
months, we are confident that inflation will, over the medium term, converge
towards our aim of below, but close to, 2%."
     - Asked whether, rather than constantly seeking to raise GDP, Europe should
adjust to permanently weak growth, De Guindos replied that demographic trends
"are not very favourable for growth. But that shouldn't stop us from
implementing reforms that aim to boost growth in the long term," such as banking
union, the creation of the European fiscal instrument, and legislative
--MNI Frankfurt Bureau; +49-69-720-146; email:
--MNI Washington Bureau; tel: +1 202-371-2121; email:
[TOPICS: M$B$$$,M$E$$$,M$X$$$,M$$BE$,M$$EC$]