FRANKFURT (MNI) – European Central Bank President Mario Draghi said
Thursday that the central bank is acting “squarely within” its mandate
in buying Eurozone government debt to remove distortions that are
hampering its ability conduct a single monetary policy.

“The actions that we’ve decided today are geared to repairing
monetary transmission channels in a way that our standard monetary
channels cannot address,” Draghi told a press conference following the
monthly meeting of the ECB Governing Council.

“This falls squarely within our mandate,” Draghi said.

The bond-buying plan, called Outright Monetary Transactions, will
be focused, as expected, on short-term debt with maturities of three
years or less. The program will have no limits on how much debt the ECB
can buy and the liquidity created by the purchases will be fully
sterilized, Draghi said.

Draghi reiterated that countries seeking aid to lower their
borrowing costs will have to apply to activate the European bailout
funds, the EFSF and the ESM, and that help will be given on the basis of
strict conditionality.

“We have given a framework for conditionality to governments,”
Draghi said. “This framework has been defined in broad lines, but it’s
very much up to the governments themselves in deciding considerations.”

The cooperation of the International Monetary Fund will be sought
in designing the conditionality and monitoring the program, he said.

Draghi said the Governing Council will have full discretion to
decide when bond purchases are warranted from a monetary policy
perspective and to terminate them when the bank’s objectives have been
met or when countries stop complying with conditions.

In a statement, the ECB said that the Governing Council “will
decide on the start, continuation and suspension of Outright Monetary
Transactions in full discretion and acting in accordance with its
monetary policy mandate.”

In unveiling the OMT program, Draghi said the ECB’s previous
bond-buying scheme, the Securities Market Program, would be terminated
and the debt acquired under program held to maturity.

The main differences in between the two programs is the OMT’s
conditionality, its greater transparency and the focus on a single part
of the yield curve, he explained.

–Paris newsroom,, +33142715540; jduffy@marketnews.com

[TOPICS: M$X$$$,M$$CR$,MT$$$$,M$$EC$]