Europe is starting to take control of its public deficits, but it remains to be seen how effective its measures will be, European Central Bank Governing Council member Luc Coene said in an interview aired on Saturday. "I think that, for the moment, we are starting to have control over the situation," Coene said in an interview with Belgian radio station La Premiere.
"Now we need a bit of time to see what is the degree of success that all of these (austerity) plans will have." In December last year leaders agreed to enforce budget discipline more strictly in the euro zone to rebuild confidence in the crisis-hit currency bloc.
Coene said direct purchases of government bonds by the ECB was not a solution to the crisis as it would mean the bank taking on a lot of political risk. Instead, financial markets would finance countries when they see the budget measures taking effect. "Once we see that the results are there, markets will be reassured and will finance countries," he said in the interview, which was also published on Saturday in Belgian French-language newspaper La Libre Belgique.
Coene added that questions over the survival of the euro zone as a result of the crisis were "complete fantasy". Even if Greece was to a leave the euro zone, Europe would come together to protect the system. "If the Greeks decide anyway to leave, something that seems to me to be completely inconceivable ... Europe will certainly stand shoulder to shoulder to protect the system."
Coene, who is also the governor of Belgium's central bank, added that Belgium needed to incorporate the secondary effects of austerity measures into its own deficit-cutting budget for 2012. This comment came after media reports on Friday which said that the European Commission had rejected Belgium's 2012 budget as being overly optimistic.
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