Europe Must Fix Banking Mess: Ex-Central Bank Chief
Europe must focus on fixing its banking sector, the former governor of the Central Bank of Turkey told CNBC on Friday.
"They have to clear this banking mess," Gazi Ercel, governor of the central bank until 2005, told CNBC at the "Russia Forum" business conference in Moscow.
"A couple of weeks ago, the Cyprus banking crisis came into the picture and no one had thought of that before. The European monetary authorities should push issues around the cleaning of the banking sector…including banking union or the banking deposit scheme," Ercel said.
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He said Europe's banks were beset with management problems and their "mentality" after the crisis had been problematic. There had also been a lack of contribution from the banking system to Europe's economic recovery, he added.
"But most importantly, the banking sector doesn't know what policy will be pursued by the European Central Bank (ECB) once the crisis is over," Ercel said.
"The European authorities should put banking union at the top of the agenda, then fiscal union and all policies should be harmonized in Europe," he said, adding that Europe's monetary policies had only partly worked as the crisis continued.
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"Central banks in developed countries should print money and reduce interest rates in order to recover the economies, and growth is the number one aim of the central banks in these countries…but almost five years have passed and we haven't seen any concrete result, particularly in Europe," he added.
He said that the European Central Bank (ECB) had "printed enormously and the balance sheet is booming to unacceptable levels" and added that Europe was fixated on inflation. "Inflation is still sleeping but on the other hand, the recessionary tendencies and growth opportunities are limited in Europe and the financial crisis goes on."