FRANKFURT (MNI) – Any future European Central Bank bond market
interventions must come with strict conditions attached, European
Central Bank Executive Board member Joerg Asmussen told German weekly
Frankfurter Allgemeine Sonntagszeitung over the weekend.
“For me personally, conditionality is imperative, because
experience has shown that our monetary policy measures are at risk of
becoming ineffective when member states believe they can relent on their
reform efforts,” Asmussen told the newspaper.
Under the central bank’s new “Outright Monetary Transactions” plan,
the ECB may buy bonds with a maturity of up to three years on the
secondary market of countries that first seek aid from Europe’s bailout
fund. The bailout fund would purchase the country’s debt on the primary
market and might also provide other forms of credit, including a full
macroeconomic rescue package a la Greece, Portugal and Ireland, or a
precautionary line of credit.
The precise conditions attached to any such program will be agreed
by governments, the European Commission and the IMF, leaving
considerable wriggling room to make support available without many
additional requirements.
The ECB has retained the right to withhold bond market support
should it be dissatisfied with the program, noting that EFSF/ESM support
is a “necessary but not sufficient” condition to trigger bond buys.
However, the Council appears to be divided over how strong the
conditions on any new bailout program would have to be to trigger
central bank intervention.
Asmussen dismissed criticism that the ECB’s policy goes beyond the
central bank’s mandate, noting that the new bond buy program was
“motivated by monetary policy [considerations] and thus within the
framework of our mandate.”
–Frankfurt bureau tel.: +49-69-720142. Email:jtreeck@mni-news.com
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