ABU DHABI (MNI) – European Central Bank President Mario Draghi said
Thursday that he was unaware of any discussion about a program that
would replace the ECB’s controversial bond-buying program.

Speaking at a press conference on the margins of a seminar of
central banks of the Eurosystem and the Gulf countries, Draghi said, “I
am not aware that there is any successor to the SMP being discussed.”

“Let me make a broader comment on this,” he continued. “The ECB,
within its primary remit, that is to ensure price stability in the
medium term, and within the limits of the [EU] treaty, cares about
financial stability…It will do its best to ensure financial stability
in the euro area…So it’s far from the truth to say that we don’t care
about financial stability.”

“If one addresses the present situation in the euro area,” he
added, “one has to be more optimistic than one had been six or seven
months ago. You can see very significant progress that’s been achieved
by many countries on the fiscal consolidation front. This is without
doubt, it’s there.”

Moreover, member states are also dealing with structural reforms,
he said, “so they’re working on both roots, both causes of the present
situation, namely fiscal consolidation and the lack of competitiveness.”

This shows the “extraordinary determination” of the countries to
address their problems, the ECB chief said. At the same time, progress
is being made on the governance front towards a fiscal compact, he said.

“So all in all, the situation is progressing for the better,”
Draghi said. At the same time, on the financial side, “we see some
markets reopening” and “some sovereign yields going down,” he continued.
Moreover, credit is not contracting throughout the area, he argued, even
if the funding situation must be monitored and it cannot be excluded the
ECB would have to do more.

Draghi was pressed to be more specific about the fate of the SMP,
to which he replied: “I’ve always said that it’s neither eternal nor
infinite…and it’s justification is to repair the monetary policy
transmission mechanisms that are not working.”

Since the resulting liquidity “is sterilized on a regular basis,”
he said, “it cannot be said to be inflationary.”

Asked for the second time during the press conference about the
ECB’s second three-year refinancing operation, scheduled for the end of
February, Draghi said, “for a variety of reasons, many of which are
technical, we do expect [uptake] at the second LTRO [to be] quite high.”
Demand would be “probably lower than the first, but very high, still
very high,” he said.

The ECB was “reasonably satisfied” with the first LTRO’s outcome,
he said, “even though…results don’t come in one day” and “the
effectiveness of the LTRO is actually being displayed over several days
and we will see more and more in the coming weeks.”

He declined to comment on talks in Athens over a haircut on Greek
debt, saying merely that “there is an ongoing negotiation between the
Greek government and the creditors at this point in time, and it would
not be proper for me to comment.”

The ECB is not a party to these negotiations, he emphasized later.

The IMF in seeking to increase its resources would “turn to all the
world, not only Europe,” as its need for such an increase is also
“general” rather than being just European, Draghi said.

The IMF earlier this week said it was seeking a E500 billion boost
in its financial firepower to help vulnerable countries.

–Frankfurt bureau tel.: +49-69-720142. Email: dbarwick@marketnews.com

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