The biggest problem facing the euro zone is a long period of stagnation, a member of the European Central Bank’s governing council said Tuesday.
“If you fear something you should fear the right thing. It’s not inflation, it is stagnation that is the real danger,” said Ewald Nowotny, who is also the governor of Austria’s central bank.
Mr. Nowotny’s comments come after the ECB last week cut its benchmark interest rate to a record low, a move that was criticized by some countries, such as Germany.
The rate cut needs to be seen in the larger economic context, Mr. Nowotny said, as it will help to increase real incomes especially for low-income earners.
Central banks have been “pushing conventional instruments up to the limit” in fighting the debt and financial crisis, Mr. Nowotny said at a conference in Vienna.
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