ECB Nowotny Opposes Joint Bond To Bail Out Ailing EMU Members 8  FEB   --But Says Joint European Bond Cld Be Positive For Euro In L-Term BERLIN - European Central Bank Governing Council member Ewald Nowotny in a newspaper interview published over the weekend rejected the idea of issuing a joint eurobond to ease financing conditions for ailing eurozone member states. --But Says Joint European Bond Cld Be Positive For Euro In L-Term BERLIN (MNI) - European Central Bank Governing Council member Ewald Nowotny in a newspaper interview published over the weekend rejected the idea of issuing a joint eurobond to ease financing conditions for ailing eurozone member states. "To issue eurobonds as a crisis instrument so that less solid states can run up debt at the cost of other [states] is absolutely unrealistic and has to be rejected," Nowotny, who heads the Austrian National Bank, told Austrian daily Wiener Zeitung. However, Nowotny added that for the long-term development of European capital markets a joint eurobond could be a positive thing. He argued that European capital markets currently cannot match the high liquidity and broad range of maturities in US capital markets. "In that regard European bonds would be positive for the position of the euro," he reckoned. Nowotny noted that during his time as vice president of the European Investment Bank he had learned that the Chinese central bank had a strong interest in a joint European bond. "This demand is currently not met but has nothing to do with the current crisis," he said. Commenting on Greece's fiscal problems, Nowotny reaffirmed that the Greek government and the social partners "need to get their house in order." He reminded that countries like Ireland had consequently implemented consolidation measures which have "been judged positively by markets." Regarding the widening interest rate differentials on government bonds in the eurozone, the Governing Council member acknowledged that there is a chance investors are now exaggerating the risks. "We have an overshooting in both directions," he remarked. "Before the economic crisis there were practically no differences regarding the cost of government bonds -- that was a misguided development because the risks had not been adequately priced in." However, "now we have an exaggeration of risks due to speculation," Nowotny reckoned. The central banker stressed that despite the current problems, the eurozone is still open for new members. He assessed the chances of Estonia to fulfill the criteria for entering the EMU as "positive." In other remarks, Nowotny said he sees no emergence of speculative bubbles in the eurozone "but indeed [does see it] in a [group] of states that are still in a development process." Such bubbles cannot be countered with monetary policy, he added. --Berlin bureau: +49-30-22 62 05 80; email: twidder@marketnews.com [TOPICS: M$X$$$,MT$$$$,M$$EC$,M$$CR$,MGX$$$,MFX$$$,M$$FX$] 2/8/2010 3:35:00 AM