04.05.201510:17:00UTC+00ECB's Constancio Convinced Greece Worst-case Scenario Will Be Avoided: Report

European Central Bank Vice President Vitor Constancio said that he was certain that Greece's exit from the euro area will be avoided.

In an interview to the Dutch daily Het Financieele Dagblad, which was published on the ECB website on Monday, Constancio said, "Like everyone else, I am concerned. But I am also absolutely convinced that the worst-case scenario will be avoided."

"At the same time, everyone acknowledges that the degree of stress and vulnerability in the euro area has totally changed. There are no signs of contagion."

Even if a Grexit materializes, the ECB is sufficiently protected from huge losses as the risk of emergency lending to Greek banks is shared with the national central bank, the Portuguese banker said.

"We jointly bear the risk on the rest of the amount. But bear in mind that collateral has been provided. We are talking about securities that are not linked to the Greek sovereign and which, on top of that, are subject to a "haircut". This should offer sufficient protection," Constancio said.

Regarding the quantitative easing of the ECB, Constancio said the programme was working well and there was no reason to stop it when inflation was negative and inflation expectations were well away from the bank's aim of 'below, but close to 2 percent'.

The policymaker also dismissed the criticism that the ECB's QE was creating asset price bubbles. "There is no generalized asset overvaluations in the euro area," he told the newspaper.

Acknowledging that the QE is prompting investors to take more risks which is more profitable, Constancio said it was this so-called portfolio shift that the central bank was seeking. However, he cautioned about the 'only danger' that the "search for yield" might get out of hand.

"We need to keep a close eye on that. It is the job of macroprudential policy, not of monetary policy, to avoid the build-up of bubbles", Constancio said.

Asked if the sharp depreciation of the euro was a side-effect of the QE, Constancio answered that exchange rates mirror the economic situation in the various countries.

He also noted that the ECB could not opt for "helicopter money", implying the way of providing funds directly to households to financing of public infrastructure, as that would take the bank very close to pursuing fiscal policy. "And that's what we cannot do," he stressed.

Further, Constancio said the ECB is striving for realizing the capital markets union in the euro area, after it set in motion the process for establishing a banking union last year.

"If it is completed in 2019, I would be very happy," the policymaker said.