The euro area’s 17 national central bank governors will have about 24 hours to digest European Central Bank President Mario Draghi’s bond-buying proposal before they start debating it, three officials said.
The ECB’s Executive Board will send a list of options for the bond-buying program to the governors on Sept. 4, a day before the Governing Council convenes in Frankfurt, the central bank officials said yesterday on condition of anonymity because the plans aren’t public. The meeting concludes on Sept. 6, after which Draghi holds his regular press conference. No single policy option has emerged as preeminent, the officials said. An ECB spokesman declined to comment.
The lack of a clear preference, the complexity of the issue and the shortage of time increase the risk that Draghi won’t present a detailed plan next week, according to economists at Commerzbank AG and JPMorgan Chase & Co. The ECB may choose to hold back some details of the plan until the German Constitutional Court rules on the legality of Europe’s permanent bailout fund on Sept. 12, two of the officials said.
Options under consideration include sovereign bond yield caps and targets on spreads over German bunds, the three officials said. One said there has also been discussion about making purchases in a range of asset classes and not just government bonds. All stressed no final decisions have been made.
The ECB has charged three committees to draw up proposals. Draghi cancelled a trip to a meeting of central bankers in Jackson Hole in the U.S. this week to work on options over the weekend, two officials said.
The deliberations take place against a background of growing tension between the ECB and Germany’s Bundesbank, which is openly opposed to government bond purchases.
Bundesbank President Jens Weidmann has considered quitting over Draghi’s plan, Bild newspaper reported yesterday, citing unidentified people with knowledge of the situation. Weidmann has decided to remain in his post to defend his position at next week’s policy meeting, the newspaper said, adding German Chancellor Angela Merkel urged him to do so.
Draghi said on Aug. 2 that the ECB may intervene in the secondary market to lower yields in countries that ask Europe’s bailout fund to buy their bonds in the primary market. They would need to agree to conditions for the aid by signing a Memorandum of Understanding.
“Some recent policy proposals in Europe have been quite constructive,” Federal Reserve Chairman Ben S. Bernanke said yesterday in Jackson Hole. “I urge our European colleagues to press ahead with policy initiatives to resolve the crisis.”