A TOP European Central Bank policymaker has called for “quantitative easing” to be used to boost the euro zone economy if deflation risks emerge across the 17-country region.

The comments by ECB executive board member Lorenzo Bini Smaghi are the strongest indication yet that the central bank would expand its options to prevent a disastrous economic slump in continental Europe.

In an interview with the Financial Times, Mr Bini Smaghi said: "I do not understand the quasi-religious discussions about quantitative easing."

Such steps had been taken in the US and UK, where the central bank had seen deflation risks, he said. Currently, the ECB did not see deflation risks for the euro zone. “But if conditions changed . . . I would see no reason why such an instrument, tailor-made for the specific characteristics of the euro area, should not be used.”

The Italian Mr Bini Smaghi steps down at the end of the year to make way for a Frenchman on the ECB board. So far, ECB policymakers have been wary about commenting on using “quantitative easing” – creating money and buying assets – to boost growth prospects. But his comments indicated its possible use had been debated within the central bank.

ECB president Mario Draghi sidestepped a question on quantitative easing in an interview published earlier this week. “We won’t achieve that by destroying the credibility of the ECB,” Mr Draghi said.

Mr Bini Smaghi stressed the importance of central bankers acting decisively. He did not rule out the ECB stepping up its intervention in euro zone government bond markets – perhaps by announcing a limit for yields or the spread between the yield on German and other governments’ bonds.

The ECB had a “duty of action” to ensure financial markets transmitted its interest rate decisions to the real economy, Mr Bini Smaghi argued. In an apparent dig at his German colleagues, he said policymakers should not “hide behind lawyers to avoid taking action”.

On Wednesday, the ECB provided €489 billion in three-year loans to more than 500 banks to ease tensions in the euro zone financial system. Mr Bini Smaghi said the strong demand for ECB funds “may be a sign of confidence gradually returning”.

David Owen, chief European financial economist at Jefferies, said the ECB would “surely have to launch” quantitative easing at some point. “I suspect it might be sooner, rather than later,” he added. – (Copyright The Financial Times Limited 2011)