ECB's Hansson warns against debt complacency

TALLINN Wed Apr 24, 2013 4:22pm BST

A structure showing the Euro currency sign is seen in front of the European Central Bank (ECB) headquarters in Frankfurt July 11, 2012. REUTERS/Alex Domanski

A structure showing the Euro currency sign is seen in front of the European Central Bank (ECB) headquarters in Frankfurt July 11, 2012.

Credit: Reuters/Alex Domanski

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TALLINN (Reuters) - European Central Bank governing council member Ardo Hansson said on Wednesday that EU states must further push economic reforms, strengthen public finances and avoid complacency, sounding a warning note as some in Europe seek to ease austerity.

His comments came after the EU executive, the European Commission, has signalled an end to sharp spending cuts.

"There is always a concern that in periods that are more calm, a certain kind of complacency is generated or maybe it reduces the pressure to reform," Hansson, the head of the Estonia central bank, told a news conference.

"It is a reminder we are dealing with the fundamentals," added Hansson, who has said in the past that the debate about economic growth versus austerity is misplaced, given high budget deficits in Europe.

His views were echoed in a review of the small Baltic state by the Estonian central bank, which said that financial market stability had been partly restored late last year, but that worries could again arise.

This could happen "if not all member states contribute sufficiently to implementing the European Union reforms or if they do not improve their own national fiscal position", the report said.

"For any potential banking crisis to be resolved quickly and effectively, it is necessary for public finances to be in good condition," the review added.

Estonian total government debt in 2012 totalled 10.1 percent of gross domestic product, a fraction of the debt levels in many other euro zone states.

(Reporting by David Mardiste; Editing by Toby Chopra)

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