European Central Bank Governing Council member Athanasios Orphanides criticized Executive Board member Benoit Coeure for suggesting the ECB could restart its bond-purchase program.
“It is not right to front-run decisions of the ECB Governing Council,” Orphanides, who heads the central bank of Cyprus, told reporters in Nicosia today when asked about Coeure’s comments. “The bond-purchase program is a tool that is there and the Governing Council of the ECB can decide when it will be used.”
Coeure yesterday triggered speculation that the ECB will restart bond purchases to help lower Spain’s borrowing costs as the debt crisis threatens to boil over again. The ECB hasn’t purchased any government bonds for four weeks after its injection of more than $1 trillion ($1.3 trillion) of three-year loans into the banking system helped debt markets rally. Some policy makers oppose the bond program, arguing it blurs the line between fiscal and monetary policy.
Spanish “market conditions are not justified,” Coeure said at an event in Paris. “Will the ECB intervene? We have an instrument, the securities markets program, which hasn’t been used recently but it still exists.”
Spanish bond yields have surged since Prime Minister Mariano Rajoy said on March 2 he wouldn’t meet a 2012 deficit goal set by the European Union.
The government, which is implementing the deepest austerity measures in three decades, is struggling to convince investors it can crack down on overspending by regional administrations as unemployment approaches 24 percent and the economy is mired in recession.