VIENNA (MNI) – The European Central Bank’s bond purchasing program
is not a permanent fixture of ECB policy and it is “is not a form of
quantitative easing,” ECB Governing Council member Ewald Nowotny said
Monday at a banking conference here.

Nowotny, speaking in English, which is not his native language,
also appeared to suggest there might be limits on the volume of
sovereign bonds the ECB is willing to take onto its balance sheet. The
central bank’s so-called Securities Market Program, he said, “is a
limited program, also time wise, and it is not part of the ordinary
instruments of the ECB” because it is “to be used only to overcome
specific market imperfections.”

Nowotny noted that the program was not part of the ECB’s
liquidity-providing tool kit, since the bank drains every week the
cumulative funds that it has injected into the system through the bond
purchases.

After abstaining from intervention in the secondary bond markets
for many months, the ECB returned in early August with high-volume
purchases to prevent yields on Italian and Spanish sovereign debt from
soaring to levels that would have made it very difficult for Rome and
Madrid to obtain financing in financial markets.

In the two months since the renewal of its bond buying in August,
the ECB has purchased more than it had in the previous 15 months of the
program’s existence. As of last week, the cumulative outstanding total
of bonds purchased and settled stood at E156.5 billion, while the weekly
total dropped to just under E4 billion from E9.8 billion the previous
week. New totals for the week ended September 30 are due at 1330
GMT/0930 ET today.

Nowotny expressed optimism that the bailout programs now in place
for Greece, Ireland and Portugal “should buy time for [these] countries
to recover growth and regain the confidence of the markets.”

Despite the euro’s recent depreciation on Eurozone debt crisis
worries, Nowotny insisted that the single currency is “a success story,
and one has to distinguish between the role of the euro as an
international currency, where it is very stable, and the problems of
some specific members of the Eurozone.”

The Austrian central bank chief also questioned a recent decision
by Germany’s constitutional court that vigorously defended the country’s
national fiscal sovereignty by giving the German parliament primacy in
deciding Germany’s contribution to any future bailout.

“In Europe we have to have coordination, but on the other hand we
have national sovereignty of parliaments,” Nowotny noted. “The German
constitutional court ruled that the budget law is the ‘crown jewel’ of
the national parliament. But if budgetary processes have a lot of
external effects, there must be coordination, and that is what the
European Parliament is for — which is a democratic institution.”

Nowotny argued that the measures taken by the ECB and other central
banks helped to “avert a crisis which could have turned into a crisis
like the crisis of the 1930s.” He added: “An averted crisis is never
that obvious, but it is important to see that a lot of the problems we
have now are the price of an averted crisis – there is no costless
crisis, and it will take time to overcome all the effects of this.”

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