AIX-EN-PROVENCE (MNI) – The European Central Bank’s bond buying
program remains “theoretically open” but that role is now more properly
played by the European Stability Mechanism, ECB Executive Board member
Benoit Coeure said Friday.
Speaking at a conference here, Coeure said the ESM was created to
help stabilize the Eurozone and it would not be appropriate for the ECB
to do what should now be done by governments.
Coeure said ECB could buy sovereign debt “only in the context of
monetary policy.” He added that central bank lending to the ESM for the
specific purpose of buying sovereign bonds would violate the rule
against monetary financing.
He said some types of ESM borrowing from the ECB might be possible,
like short-term bridge financing, but he suggested that nothing specific
was under consideration.
On the recent rise in peripheral market bond yields, Coeure said an
initial burst of market enthusiasm after a summit agreement was often
followed by skepticism that summit decisions would be implemented.
“The biggest risk to the euro is not markets,” Coeure said. “The
biggest risk to the euro is a lack of political will” to follow through
on the decisions taken at the summit.
He repeated that it was “urgent” to put a single banking supervisor
in place in the EU because that would allow banks to be directly
recapitalized by the ESM and help break the link between weak banks and
weak governments.
–Paris newsroom, +33142715540; jduffy@marketnews.com
[TOPICS: M$$EC$,M$$CR$,M$X$$$,MGX$$$]
