European Central Bank Governing Council member Luc Coene said the timing of the new ECB bond-purchase plan is out of its control, as aid requests need to be first “approved by a lot” of people.
“It’s not depending on us how fast we will react,” Coene told reporters in Luxembourg late yesterday when asked how quickly the ECB would intervene in government bond markets. “It will depend on all the other instances that have to approve these things and then we will intervene.”
ECB policy makers yesterday agreed to an unlimited bond-purchase program to regain control of interest rates in the euro area and fight speculation of a currency breakup. This would work in tandem with the region’s rescue fund, and it is now up to the governments in Spain and Italy to trigger ECB bond purchases by requesting aid from the fund and signing up to conditions.
“Conditionality is essential,” Coene said. “We cannot unclog the monetary transmission mechanism if these fundamental structural imbalances are not addressed.”
Coene said it’s “foreseen right now” that all other euro-area members will have to agree to a rescue fund aid request. So far Spain and Italy have not asked for help.
The ECB’s program, called Outright Monetary Transactions, will target government bonds with maturities of one to three years, including longer-dated debt that has a residual maturity of that length.
Coene said the Governing Council will decide on how to activate, run and suspend any bond buying. The International Monetary Fund will be asked to help design and monitor country-specific plans.
Since the ECB and the national central banks aren’t in charge of structural or fiscal policies in euro-area countries, they can “neither solve nor be held responsible for problems in this domain,” Coene said.
At the same time, “ we will also remain attentive to economic and institutional developments in the euro zone and we won’t hesitate to share our reflections,” he said.