— Should Not Rule Out ECB Taking Haircuts On Greek Bonds
FRANKFURT (MNI) – The permanent European bailout fund, ESM, should
be granted a banking licence enabling it to borrow in the European
Central Bank’s refinancing operations, Austrian Chancellor Werner
Faymann said in an interview with German magazine Der Spiegel.
“If we manage to get debt brakes into the constitutions of member
states and maintain stricter controls on frugal budgetary policy, then
we need to take the next step toward further safeguards. I am therefore
in favor of the ESM being granted a banking concession, enabling it to
refinance with the ECB,” Faymann told the magazine.
The ECB has thus far rejected this idea, noting in March 2011 that
the Maastricht Treaty “would not allow the ESM to become a counterparty
of the Eurosystem.” In particular, the central bank cites the monetary
financing prohibition.
Faymann also advocated increasing the size of the ESM beyond the
current E500 billion. He supports an idea initially floated by ECB
president Mario Draghi under which the roughly E250 billion that remain
in the European Financial Stability Facility would be folded into the
ESM.
“That way we would come out with E750 billion. The financial
markets are observing us very closely, and they judge our strength by
the height of the firewall,” Faymann said.
Asked whether the ECB should consider contributing to debt relief,
Faymann said he did not “think that can be ruled out. But until the
overall picture is complete it makes no sense to discuss every single
mosaic piece.”
— Frankfurt newsroom: +49-69-720142; email: jtreeck@marketnews.com
[TOPICS: MT$$$$,M$X$$$,M$$EC$]
