European Central Bank Governing Council member Ewald Nowotny said it’s not the bank’s job to repair the finances of lenders reliant on it for funding.
“It is the primary responsibility of the national governments involved to take care of the problem of specific banks,” Nowotny said in an interview in Vienna today. “This is not the task of the ECB. The ECB never had a policy which is geared toward specific countries or specific banks.”
Some banks in peripheral euro-region countries like Ireland, Spain, Greece and Portugal are still frozen out of the interbank lending market, rendering them reliant on the ECB for their funding. This is complicating the ECB’s exit from its emergency measures, which include lending banks as much money as they need for up to three months, as well as government bond purchases.
European leaders frustrated ECB officials’ bid to relinquish the central bank’s role as buyer of last resort of bonds from struggling euro nations on March 12, when they agreed to let the European rescue fund buy bonds directly from governments, rather than in the secondary market, where the ECB purchases them.
“We have started developments in the right direction,” Nowotny said, when asked if he was disappointed with the outcome. “Included in these decisions is the possibility to buy government bonds directly and one has to be aware that the underlying philosophy is that every assistance should be coupled with some conditionality and some direct involvement.”
ECB policy makers have also signaled they want to raise interest rates next month to stem increasing inflation pressures. Asked if the economic uncertainty resulting from the earthquake and tsunami in Japan and political tensions in North Africa could prompt officials to change their mind, Nowotny said that officials follow developments “very closely” and that it’s “too early” for any conclusions.
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