Central Banks

Targeting the euro is not a solution: ECB’s Praet

Euro level not key to competitiveness: ECB's Praet

European governments should reform their economies to improve competitiveness, rather than urge the European Central Bank (ECB) to step up measures to temper the strength of the euro, ECB Board Member Peter Praet said Wednesday.

The comments come a day after the Airbus chief executive complained about the strength of the single currency, echoing comments made by France's President Francois Hollande and Prime Minister Manuel Valls. France failed to grow in the first quarter of this year after household expenditure and exports slowed considerably.

Praet, speaking to CNBC in Paris, insisted reform, innovation and efficiency were key to competitiveness, while the exchange rate was no more than a short-term aid.

"The experience with exchange rates usually shows you that the exchange rate is not really the solution to the problems that you have," he said.

Praet said the central bank did not see a risk of deflation in the euro zone, but warned there were risks to growth in the region.

No deflation risk but euro zone fragile: ECB's Praet

"We don't see deflation risk, but we also expressed our concerns about a prolonged situation where the increase of price – our main objective – would be diverging for too long period of time from our objective of close to 2 percent," Praet told CNBC in an interview.

Just over a year ago, the ECB took the unprecedented step of committing to keeping interest rates "at present of lower levels for an extended period of time" at its monthly meeting.

Praet said the bank's assessment of the economic situation in the euro zone had not changed since the bank issued its forward guidance.

"I would say the situation is broadly the same as we saw it more than a year ago already," he said. "It's weak growth, it's still uneven, fragile with downside risks…with subdued price pressures extending into the medium to long term."

Pockets of exuberance

With many asset classes, and stocks in particular, rising to historical highs, Praet warned that we may be seeing "pockets of exuberance" in the markets.

Many experts have blamed the huge gains -- described by some as a bubble -- on loose central bank policy.

Read MoreStiglitz: I'm very uncomfortable with current stock levels

But Praet said the ECB's policies were both aimed at price and financial stability.

"In terms of financial stability, I think it's very important to remember that had we not taken the measures we have taken, we would have really financial instability," he said.

Credit was still very weak, Praet said, adding the ECB did not see a signal of exuberance in the credit market. "On the contrary".

The ECB unveiled a new round of long-term loans for banks last month to breathe life into a sluggish euro zone economy and foster bank lending to firms.

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