Oct. 11 (Bloomberg) -- The European Central Bank reiterated it will only buy bonds if governments agree to certain conditions.
“We are ready to undertake” bond purchases “once all the prerequisites are in place,” the Frankfurt-based ECB said in its monthly bulletin today, echoing President Mario Draghi’s Oct. 4 policy statement. The ECB will consider government bond purchases on the secondary market “to the extent that they are warranted from a monetary policy perspective as long as program conditionality is fully respected,” it said.
Draghi last month unveiled details of the so-called Outright Monetary Transactions program, under which the ECB may buy bonds in tandem with Europe’s bailout fund if a country asks for aid. So far neither Spain nor Italy, the nations that pushed hardest for the program, have requested assistance because of uncertainty over the conditions that would be attached.
The ECB would stop buying bonds if a government fails to comply with the conditions.
The announcement of the OMT program has helped to alleviate financial-market tensions over the past few weeks, “thereby reducing concerns about the materialization of destructive scenarios,” the ECB said. “It is now essential that governments continue to implement the necessary steps to reduce both fiscal and structural imbalances and proceed with financial sector restructuring measures.”
The euro-area economy will “remain weak in the near term” and “recover only gradually thereafter,” with risks to the outlook on the downside, the ECB said. Inflation will drop below 2 percent next year and price risks are broadly balanced, it said.
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