por admin » Jue Sep 06, 2012 9:05 am
ECB to Buy Bonds In the Open Market, Relax Collateral Framework
By GEOFFREY T. SMITH
FRANKFURT—The European Central Bank unveiled radical new measures Thursday to support the debt markets of fiscally-challenged countries and ensure that their banks have enough access to its credit lines.
President Mario Draghi told journalists at a regular news conference following the meeting of the ECB's governing council that the measures, central to which are the purchases of government bonds in the open market, will provide "a fully effective backstop" against market volatility.
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"We need to be in a position to safeguard the monetary policy transmission mechanism in all countries of the euro area," Mr. Draghi said, repeating that the ECB would stay "firmly within our mandate" of keeping stable prices.
The details of the plan were largely in line with leaks that had dribbled out of the ECB and national central banks over recent days. The ECB will buy government bonds of remaining maturities between one and three years without announcing any limits in advance, as long as the government in question is under a program approved by the euro zone.
Crucially, Mr. Draghi confirmed that the ECB won't claim the status of a senior creditor if the bonds it buys subsequently have to be restructured.
It will continue to offset its purchases in full by taking an equal amount of money out of circulation, and will only continue its purchases as long as the country in question is deemed to be complying with the conditions it has agreed with the euro zone, he said.
The ECB wants to offset, or "sterilize", its purchases to avoid increasing the monetary base, which typically consists of cash in circulation, plus banks' reserves at the central bank.
The new program, called "Outright Monetary Transactions", replaces the existing Securities Markets Program under which the central bank had bought some €209 billion ($263 billion) in government bonds. Mr. Draghi said there was one dissenting view within the ECB regarding the program, in an apparent reference to Deutsche Bundesbank head Jens Weidmann who has publicly opposed the bond purchase plan.