FRANKFURT (MNI) – European Central Bank President Mario Draghi
played down the potential usefulness of making new cheap long-term loans
to the financial sector.
“The issue now is whether these LTROs would be effective,” he said.
“Some of the problems in the euro area have nothing to do with
monetary policy,” Draghi told journalists at the ECB’s regular monthly
briefing. “I don’t think it would be right for monetary policy to fill
other institutions’ lack of action,” he said, hinting at the high degree
of political uncertainty surrounding the future of Greece and the
Eurozone.
A similar logic applied to possible further purchases of government
bonds by the ECB, he said.
The ECB’s two three-year Long Term Refinancing Operations (LTROs)
helped to “prevent a more serious credit crunch” and reduce tensions in
the banking sector, but the current situation facing euro area member
states is “fragmented” he said. “I don’t think [the LTROs] have actually
exhausted all their effects. We will look at how the funding conditions
proceed.”
The ECB chief observed that interbank lending markets are currently
“very dysfunctional.” The Eurozone needs to come up with a long-term
vision and roadmap for the future of the currency union to restore
stability and investor confidence, he said.
Draghi and the presidents of the EU Council, Commission and
Eurogroup are working on such a plan for EU leaders to discuss at a
summit on June 28-29.
Draghi rejected suggestions that the ECB was refraining from
undertaking further measures to calm markets so it could maintain
pressure on political leaders to implement reforms.
“There has never been a quid pro quo between monetary policy
decisions” and “high level decisions regarding the future of the euro
area,” he asserted.
–Brussels newsroom: +324-9522-8374; pkoh@marketnews.com
[TOPICS: M$X$$$,M$$EC$,MGX$$$,MT$$$$,M$$CR$]
