European Central Bank Executive Board member Benoit Coeure said the ECB’s bond-purchase program will improve financing conditions for the private sector.
“Recent evidence supports the view that the sovereign debt crisis has had a negative impact on the supply of bank credit,” Coeure said in a speech in Frankfurt today. The bond-buying plan, dubbed Outright Monetary Transactions, will “contribute to restoring access to finance for the private sector,” he said.
ECB President Mario Draghi said in July the ECB will do whatever it takes to save the euro and announced the OMT program in September. Investors are now waiting for countries like Spain to seek aid from Europe’s rescue fund and sign up to conditions to trigger ECB debt-market interventions.
Just the “mere announcement” of the OMT has “already helped to ease uncertainty in the system,” Coeure said. “The effect on confidence, a key factor for growth, has also been significant, and rightly so.”
Referring to the ECB’s liquidity policies, such as fixed-rate full-allotment refinancing operations and three-year loans to banks, Coeure said research suggests they’ve had “a significant economic effect, in that the level of industrial production is 2 percent higher and the unemployment rate 0.6 percent lower relative to a scenario with no such non-standard measures.”