Borrowing from the fund set up to rescue heavily indebted euro zone nations should total no more than half the sum it is authorised to lend by the time it expires, ECB governing council member Erkki Liikanen said.
Despite Ireland last month becoming the second euro zone country to seek a bailout, Mr Liikanen said today that the European Financial Stability Facility's €440 billion safety net should be big enough to cover the region's needs with something to spare.
"The actual sum that will be lent will probably stay at half of that," Mr Liikanen told a news conference.
The fund, which runs until 2013, was set up to provide temporary financing to euro zone countries facing debt meltdowns as part of an EU/IMF rescue package worth €750 billion.
Concerns that Portugal and then Spain could eventually require a bailout have fuelled investor unease and prompted speculation the EFSF might need a second injection of funding pledges, which two European Central Bank policymakers said yesterday should not be ruled out.
Lorenzo Bini Smaghi said European countries should be ready to increase the size of the fund and Jozef Makuch said they were prepared to do so if necessary.
Mr Liikanen added that central banks should play a key role in preventing financial market bubbles and joined the chorus of policymakers calling for an ambitious approach to managing debt.
"Authorities have not had adequate means for intervening in the excessive rise in asset prices, lending and the excessive growth in indebtedness," Mr Liikanen said in comments accompanying today's Bank of Finland's quarterly report.
"Central banks should play a central role in putting into use measures whose effect is in calming excessive lending and indebtedness, so called macroprudential policies."
The recent crisis has shown that there are massive risks associated with an uncontrolled rise in asset prices, he said.
Mr Liikanen urged European politicians to toughen up new rules on debtholder liabilities.
He said high levels of indebtedness along with a weakened competitiveness have sapped the market confidence in many countries' ability to service their debts.
"When reforming the governance of economic policies, it is important that the EU and its member states are suitably ambitious."
Mr Liikanen noted budget consolidation measures taken by the European governments could hamper growth in the short term, but "it is very difficult to find an alternative. They must consolidate their public budgets... so they can create confidence."
He also said that low inflationary pressures and inflation expectations in line with the ECB's price stability objective, had enabled the bank to keep monetary policy accommodative.
Emergency ECB lending would "continue to be practiced until at the least the end of the first quarter of the coming year", Mr Liikanen said.
The Bank of Finland report added that there were early signs that banks were beginning to reverse the long-running process of tightening credit standards.
It warned, however, that the euro zone economy remained fragile and that countries would find it harder to cut debt levels in the coming years due to weak economies.
Reuters