PARIS (MNI) – The European Central Bank may undertake “outright
open market operations” to reduce interest rates risk premiums that are
related to fears about the future of the euro, ECB President Mario
Draghi said on Thursday.
“Risk premiums that are related to the fears of the reversibility
of the euro are unacceptable,” Draghi said. “The euro is irreversible.”
Draghi said, however, that Eurozone governments need to take action
to activate Europe’s bailout fund, the European Financial Stability
Facility, before the ECB can act.
“Governments have to go to the EFSF,” Draghi said. “The ECB cannot
replace governments, or cannot replace the action that other
institutions have to do.”
If the bailout funds fulfill their roles, the ECB “may undertake
outright open market operations of a size adequate to reach its
objectives,” Draghi said, adding that concerns about the ECB’s status as
a senior creditor “will be addressed.”
The precise modalities of the open market operations will be
determined in the weeks ahead, he said, noting that no country has asked
for assistance of the EFSF, so there is no need to act immediately.
Draghi rejected market speculation that the permanent bailout fund,
the European Stability Mechanism, could be given a banking license in
order give it more firepower for market interventions. The ESM cannot be
“recognized as a suitable counterparty” for ECB refinancing, he said.
–Paris newsroom, +33142715540; jduffy@marketnews.com
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