FRANKFURT (MNI) – The effect of the European Central Bank’s OMT
sovereign bond-buying program on confidence in the Eurozone has been
significant, ECB Executive Board member Benoit Coeure said Thursday.

“The mere announcement of the OMTs … has already helped to ease
uncertainty in the system,” Coeure said in prepared remarks to a
conference in the US state of Indiana. “The effect on confidence, a key
factor for growth, has also been significant, and rightly so,”

Coeure said he expected the ECB’s non-standard measures should also
have an effect on the private sector’s access to credit, which has been
impaired in certain EMU member states.

“While growth prospects have deteriorated too, and consequently
weak aggregate demand may be the dominant problem faced by euro area
[small businesses] right now, impaired access to finance by the
corporate sector in a number of euro area countries is clearly a problem
that cannot be neglected and will come to the forefront when aggregate
demand recovers,” Coeure said.

“It is reasonable to argue that by counteracting undue risk premia
on government bonds, the ECB’s non-standard measures, such as the OMTs,
will contribute to restoring access to finance for the private sector,”
he said.

Coeure said the ECB would continue to pay “particular attention” to
the impact of its non-standard measures on small and medium-sized firms
in the Eurozone. But he also reiterated that central bank action could
not put the Eurozone back on a sustainable path to growth.

“All actions from central banks, although crucial for alleviating
frictions and dysfunctionalities in financial intermediation and the
transmission mechanism, and also for guaranteeing financial stability
and the sheer survival of the system, cannot replace reforms in
individual euro area countries aimed at reducing fiscal and external
imbalances and creating an innovative and competitive economic
environment. Only such reforms can foster sustainable growth and
employment in the future,” he said.

–MNI Frankfurt Bureau; tel: +49 69-720-142; email: ccermak@mni-news.com

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