European Central Bank Executive Board member Benoit Coeure said actions by the world’s biggest central banks have reduced pressures in financial markets.
Policy interventions by the ECB, the Federal Reserve System and other central banks “have certainly eased financial market pressures,” Coeure said today in Paris, according to a speech published on the ECB’s website. “Although we are still grappling with tensions in credit and sovereign debt markets, and with the painful adjustment of our economies, the financial system is recovering.”
With the sovereign debt crisis entering its fourth year and at least five of 17 euro-area countries in recession, the ECB in August unveiled a plan to buy government bonds to quash speculation of a euro breakup. Germany’s Bundesbank opposes the program, saying it is tantamount to financing governments.
Referring to economic models prior to the crisis, Coeure said they “proved to be relatively inadequate to deal with the complexity of the crisis.” It is also true that our models “did not predict the crisis and provided only limited policy guidance,” he said.