PARIS (MNI) – The European Central Bank must keep a tight lid on
government bond purchases or risk losing its political independence and
even violating EU rules, ECB Governing Council member Mario Draghi said
in an interview published Thursday evening.

Draghi, who also is the governor of the Bank of Italy and chairman
of the Financial Stability Board, told the Financial Times that if the
ECB spends too much buying up EMU national government debt in an attempt
to stabilize bond markets, it risks “losing everything we have.”

“I’m only too aware that we could easily cross the line and lose
everything we have, lose independence, and basically violate the [EU]
treaty,” Draghi told the paper.

With his warning, Draghi moves in the direction of fellow ECB
colleague Axel Weber, who has taken an even harder stance, criticizing
the bond buying decision since the day it was announced in May and
making clear he voted against it.

With his outspoken refutation of the program, viewed by his
colleagues as essentially airing the ECB’s dirty laundry, Weber is
thought by many observers to have undercut his position as the leading
contender to replace Jean-Claude Trichet as ECB president when Trichet’s
term ends next autumn.

In this regard, Draghi’s comments are rather interesting, because
he is widely considered Weber’s chief rival for the ECB presidency.

After spending about E55 billion on government bond purchases in
the first two months of the program, the ECB ratcheted its interventions
down to a mere trickle for the next three months. Recently, with the
flareup of sovereign debt tensions, the central bank was forced to buy
more heavily.

As of last Friday, the volume of bonds purchased and settled since
the inception of the program hit E69 billion. It should easily top E70
billion when number for this week are published next Monday.

In the interview, Draghi said the main responsibility for easing
the crisis lies with national governments, whom he called on to
implement “credible fiscal action and structural reforms that relaunch
growth.”

Despite the turbulence, Draghi insisted that “the euro is not in
question.”

Draghi also told the FT that the ECB is discussing “concrete
proposals” for dealing with banks that are essentially addicted to the
central bank’s unlimited liquidity provisions. Steps to end the
dependence of those banks should be part of the ECB’s exit strategy when
it resumes withdrawing its emergency liquidity operations sometime after
the first quarter of 2011, Draghi said.

–Paris Newsroom, +331-42-71-55-40; bwolfson@marketnews.com

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