– Adds Details On OMT, ECB Voting Powers, Greece

FRANKFURT (MNI) – Activating the European Central Bank’s new OMT
bond-buying program would be helpful to counter remaining doubts about
its effectiveness, ECB Governing Council member Ewald Nowotny said in an
interview released Monday.

The governor of the Austrian central bank also suggested that
voting weights on the Governing Council might be modified to better
reflect member countries’ economic size.

Markets still “doubt that there is an effective mechanism,” Nowotny
told the German business daily Handelsblatt. “This is why I think it
would be sensible to demonstrate that we have a power station that we
can use in case of emergency.” An activation of market intervention
would thus be “sensible.”

The ECB had hinted at unlimited intervention in bond markets more
than three months ago. The announcement has pushed down Spanish 10-year
government bond yields from a peak of more than 7.5% in late July to
around 5.76%. Lower interest rates have also helped Spain to put off
requesting a bailout from Eurozone authorities.

Nowotny reiterated that the ECB will activate the program only if
strict conditions are set by Eurozone authorities. “There is no
automatism that obliges the ECB to take action,” he said, stressing that
this would remain an “autonomous, monetary policy decision.”

Nowotny said he could understand why the ECB’s current voting
system, which gives each member state one vote regardless of its share
in the ECB’s capital and the risks it therefore carries, could be
considered “problematic” in some quarters.

“This was a political decision that from my view as an economist
does not have to remain untouched,” he said, suggesting instead that
there “should be a connection between risk burdens and voting powers.”
He acknowledged this was a decision for political leaders.

On Greece, Nowotny said that the recovery process “will take very
long” and that this must be reflected in any future aid program. Nowotny
estimated Greece might take another ten years to solve Greece’s
problems.

– Frankfurt bureau: +49 69 720 142, email: frankfurt@mni-news.com

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