The European Central Bank will intervene in bond markets on behalf of countries only in conjunction with the euro zone's bailout programs and only if the International Monetary Fund is involved in the reform process, an ECB executive board member said Thursday.
"The ECB will only act in parallel with the European Financial Stability Facility and later the European Stability Mechanism," ECB Executive Board Member Joerg Asmussen said at an economic forum hosted by Germany's Social Democrats in Potsdam, Germany.
"In my view that also means the IMF will be involved in the setup of the adjustment program," he said, adding that the IMF has unique experience as the "external police" in this process.
Earlier this month, ECB President Mario Draghi indicated the ECB may soon step in to buy government bonds on the open market to lower the high borrowing costs of financially stressed euro-zone economies.
He had said such measures would occur only under strict conditions and after the troubled countries, such as Spain and Italy, have submitted a request for aid.
Mr. Asmussen repeated Mr. Draghi's demands that countries first make a formal request for aid, which would ensure through the bailout programs that conditions can be set for receiving aid. "Personally I consider this conditionality mandatory," he said.
The bonds purchased would have short maturities and the central bank would address the ECB's perceived preferred-creditor status, he added. The ECB will also act independently in its bond purchases, the central banker said.
The program is still under development, he added, and Mr. Draghi would discuss the results next Thursday, when the governing council is scheduled to meet. Mr. Asmussen said the outlook for the euro-area economy would be weak in the coming months.
At the same time, the ECB's monetary policy actions aren't reaching the real economy, he said. That will continue thanks in part to speculation about exit scenarios for euro-zone member states, he said, adding that it is the job of the ECB to repair the problem.
He also assured the audience that the central bank would always act within its mandate and guard price stability. Inflation expectations are firmly anchored. Turning to Greece, Mr. Asmussen noted that the troubled country has made progress in its reforms.
But he warned that giving the country more time to meet further targets in its adjustment program would cost more money that the partner countries may have to provide.
"The problems in the euro area are concentrated in individual countries, and need to be solved primarily by those countries," Mr. Asmussen said.
foxbusiness.com
"The ECB will only act in parallel with the European Financial Stability Facility and later the European Stability Mechanism," ECB Executive Board Member Joerg Asmussen said at an economic forum hosted by Germany's Social Democrats in Potsdam, Germany.
"In my view that also means the IMF will be involved in the setup of the adjustment program," he said, adding that the IMF has unique experience as the "external police" in this process.
Earlier this month, ECB President Mario Draghi indicated the ECB may soon step in to buy government bonds on the open market to lower the high borrowing costs of financially stressed euro-zone economies.
He had said such measures would occur only under strict conditions and after the troubled countries, such as Spain and Italy, have submitted a request for aid.
Mr. Asmussen repeated Mr. Draghi's demands that countries first make a formal request for aid, which would ensure through the bailout programs that conditions can be set for receiving aid. "Personally I consider this conditionality mandatory," he said.
The bonds purchased would have short maturities and the central bank would address the ECB's perceived preferred-creditor status, he added. The ECB will also act independently in its bond purchases, the central banker said.
The program is still under development, he added, and Mr. Draghi would discuss the results next Thursday, when the governing council is scheduled to meet. Mr. Asmussen said the outlook for the euro-area economy would be weak in the coming months.
At the same time, the ECB's monetary policy actions aren't reaching the real economy, he said. That will continue thanks in part to speculation about exit scenarios for euro-zone member states, he said, adding that it is the job of the ECB to repair the problem.
He also assured the audience that the central bank would always act within its mandate and guard price stability. Inflation expectations are firmly anchored. Turning to Greece, Mr. Asmussen noted that the troubled country has made progress in its reforms.
But he warned that giving the country more time to meet further targets in its adjustment program would cost more money that the partner countries may have to provide.
"The problems in the euro area are concentrated in individual countries, and need to be solved primarily by those countries," Mr. Asmussen said.
foxbusiness.com
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