FRANKFURT (MNI) – The European Central Bank would welcome the
European bailout fund purchasing sovereign bonds on the secondary
market, given its reluctance to restart its own SMP bond-buying program,
Governing Council member Ewald Nowotny said in an interview published
Monday.
“The EFSF has the ability to buy sovereign debt in the secondary
market. The ECB has welcomed this possibility, because it does not want
to continue its program of buying sovereign debt,” the president of the
Austrian central bank to the Austrian daily Kurier.
But while Italian Prime Minister Mario Monti’s call for such bond
buys was possible in theory, Nowotny said the rules for such purchases
have yet to be settled. Any such program must come with conditions in
order to stick to the principles that have governed the EFSF to date, he
said.
Nowotny also said common Eurozone bonds could come only after
fiscal union. The ESM bailout fund – due to take effect in July – could
be “strengthened” in the interim, he said, voicing concern about
possible delays to the ESM’s start. He warned against viewing either
bailout fund as a form of permanent aid.
“The basic principle behind the bailouts is to provide aid for a
specific time period until structural reforms can take effect. It cannot
involve permanent aid,” he said.
Nowotny cautioned against excessive hopes for the EU summit later
this week: “We must be careful not to build up major and unrealistic
expectations, which would mean that major disappointment is already
built in.”
At the summit, EU leaders should focus on an overall perspective
for the far-reaching concepts of political union, fiscal union and
banking union, he urged.
On Greece, Nowotny said an appraisal of its progress to date should
come before any talk of giving the new government more time to meet its
fiscal targets.
— Frankfurt bureau: +49 69 720 142; email: ccermak@marketnews.com
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