FRANKFURT (MNI) – The European Central Bank will not allow fears
regarding the euro’s permanence to push up yields on sovereign debt,
Executive Board member Benoit Coeure said in an interview released on
Monday.
Coeure told Slovakian daily Hospodarske Noviny in the same words
used last Thursday by ECB President Mario Draghi that the euro is here
to stay and that if monetary authorities buy government debt, then only
if certain conditions are met and in sufficient amounts to accomplish
its mission.
“At its meeting on 2 August, the Governing Council has made it
clear that it will not accept higher sovereign bond yields due to fears
of the reversibility of the euro,” he said. “The euro is irreversible.”
It is up to governments to activate the bailout fund in the bond
market and impose conditionality on those member states recurring to the
fund, he said.
“Within its mandate to maintain price stability, and in strict
independence, the ECB may then undertake sovereign bond purchases,” he
said. “Such operations will be of a size adequate to reach our
objective. The Governing Council may also consider undertaking further
non-standard monetary policy measures. Over the coming weeks, we will
design and communicate the appropriate modalities.”
Coeure denied any “specific need” for global central banks to act
in concert. He also rejected the idea that the ECB would tolerate higher
inflation for the sake of more economic growth.
“In an already highly uncertain environment, why should we
introduce another element of uncertainty?,” he asked rhetorically. “This
would only be harmful to the purchasing power of European citizens. Our
aim is to ensure price stability and keep inflation in the euro area
below but close to 2% over the medium term. We have done so in the past
and we will do it in the future.”
The two three-year long-term refinancing operations conducted by
the ECB were “very successful in addressing risks to the funding of euro
area banks,” Coeure affirmed. Their full impact, however, will come
“only when the economy recovers.”
Aiming ECB funding operations more closely at the real economy and
in particular small and medium-sized enterprises warrants “further
thoughts,” he said.
The ECB is not considering any further steps with regard to
deposits at banks in Greece and Spain, Coeure said, calling these
deposits “currently stable” and noting that any financially sound
Eurozone bank with appropriate collateral can get ECB liquidity.
A sound banking sector in Europe won’t be achieved if all banks are
saved, he said: “Insolvent institutions should be resolved, and any
European support to a national banking system should come with strong
control, independent valuation of assets and liabilities, and adequate
loss-sharing to protect taxpayer money.”
–Frankfurt bureau tel: +49-69-720-142. Email: dbarwick@marketnews.com
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