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09 August 2011

ECB Trichet: Italian, Spanish bond purchases not a shift in ECB strategy


ECB President Trichet said today that the purchases of Italian and Spanish government bonds do not represent a shift in strategy for the European Central Bank, but are aimed at helping the transmission of monetary policy.

Trichet said these measures should help restore confidence on battered financial markets, but he stressed confidence wouldn't return for good unless governments demonstrate their commitment to stricter fiscal discipline.

Observers have said buying the sovereign debt of larger eurozone nations that are not benefiting from eurozone rescue programmes would mark a turning point in ECB policy. But Trichet insisted this is not the case, and that such steps were only meant to help the ECB fulfill its primary mandate of keeping price stability. "The concept is to try and restore the normal functioning of markets through a better transmission of monetary policy, in order to ensure price stability," Trichet said in an interview with French radio Europe 1.

But Trichet made clear the ECB's propping up of Spanish and Italian government bond prices was conditional on these two countries accelerating their budget consolidation. "What we expect is that governments do their jobs in a way that is commensurate with their responsibilities. We have asked Italy and Spain to speed up their return to a normal budgetary situation", he said.

Trichet wouldn't comment on the need to expand the size of the EFSF, but he urged eurozone governments to accelerate the implementation of all the measures agreed at the recent eurozone summit.

Full article



© Wall Street Journal


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