–No ECB OMT Purchases Without IMF Participation
FRANKFURT (MNI) – Deflation remains a greater risk than inflation
as the Eurozone nears recession, European Central Bank Executive Council
member Benoit Coeure said in an interview with Germany’s Die Welt
While there are no current signs of inflation risks, Coeure made
clear the that price stability will remain the central bank’s key
objective even if growth remains weak down the road.
Coeure told the daily newspaper that the ECB will not buy any
sovereign bonds under its Outright Monetary Transactions program without
at least some level of participation in an aid program by the
International Monetary Fund.
Coeure suggested the ECB will not offer prolonged bridge financing
for Greece and said it was up to EMU member states to find the funds if
they decide to give Athens more time to meet its fiscal targets.
Coeure said the Eurozone is “not far from a recession. Therefore
the danger of deflation is greater than that of inflation. But when the
central bank council has to decide between more inflation or less
growth, then price stability would always take priority. That is our
core task. Our mandate is clear,” he said.
Coeure said that while he could understand the “degree of
uncertainty” in Germany, early indicators of money supply growth showed
there were no current inflation dangers on the horizon.
“Of course we keep an eye on how broad money growth is developing,
because it is a reliable early sign of inflation risks. So far it is not
rising particularly fast. If inflation risks should turn up, we would
steer against them. We have the necessary instruments for this,” he
While it was necessary for the ECB to act to preserve financial
stability, Coeure also reiterated that its crisis-measures do not take
priority over its key mandate.
“All of our crisis measures are within our mandate. If any of these
measures were to come into conflict with price stability, we would stop
them or adapt them. So far this has not been the case,” he said.
“Financial stability can only be an intermediate goal, price
stability must always stand at the end. If these two goals come into
conflict, price stability must stand in the foreground here too.”
Coeure said the IMF’s participation as an independent monitor in a
bond-buying program for any Eurozone country would serve as an
“insurance against us being forced into ceding ground continuously to
“For me, personally, it is clear: Without a certain participation
of the IMF, we should not buy any sovereign bonds. Then there will be no
OMT program,” Coeure told the daily newspaper.
Coeure said this did not mean the IMF had to participate
financially, as it has with other EMU rescue programs, but “it should
continue to monitor the reform programs together with the European
Commission and in conjunction with the ECB.”
ECB President Mario Draghi has also said he expects the IMF to be
involved in any OMT bond-buying program, but has so far not said whether
this would be a necessary condition for purchases.
Coeure also made clear the ECB will not give in to market pressure
to act early: “We will not buckle, we will only step in when our
conditions have been met. That we will prove to you,” he said.
On Greece, while Coeure said ECB would continue to offer emergency
liquidity to solvent Greek banks, he suggested there was a clear line
that could not be crossed.
“It must be clear that the central bank will not conduct state
financing through the printing press, not directly or indirectly,” he
said. “That means, if additional emergency credits to banks clearly
serve the purpose of buying bonds, we would not allow this in the ECB
“If the EU countries agree to give Greece more time, they will have
to see themselves how they can raise the necessary money,” Coeure said.
Coeure also said the ECB’s newly planned bank supervision role
should be allowed the time it needs to develop, though the legal
structure should be put in place by the European Council by January 1,
“The highest priority is that the supervision works. And if more
time is needed for this, then we should take this time,” Coeure said.
— Frankfurt bureau: +49 69 720 142; email: firstname.lastname@example.org —