European Central Bank President Jean-Claude Trichet rebuffed Bundesbank President Axel Weber’s call to terminate the bond purchase program, saying the “overwhelming majority” of the bank’s 22-member Governing Council still backs the buys.
Asked in an interview with Italian newspaper La Stampa whether the program didn’t work and should be scrapped, he responded: “No! This is not the position of the Governing Council, with an overwhelming majority.”
Weber, who also sits on the ECB’s decision-making council, said on Oct. 13 that the bond-purchase program should be stopped. The remarks, the strongest from any ECB official advocating a removal of stimulus, came as governments and banks in Ireland, Portugal and Greece struggle to convince investors they can fix their budgets and balance sheets in the aftermath of this year’s sovereign debt crisis.
The ECB started buying bonds in May as part of a European Union-wide push to rescue the euro after the Greek crisis threatened to undermine the 16-nation currency bloc.
“This non-standard measure, like all other such measures, was designed to help restore a more normal functioning of our monetary policy transmission mechanism,” Trichet said, according to a transcript of the interview published on the ECB’s website today.
Weber Frontrunner
Weber is regarded by economists as a frontrunner to succeed Trichet when his non-renewable eight-year term expires in just over a year. Trichet regularly characterizes his job as acting like a spokesman for the ECB’s council.
“There is only one single currency; there is one Governing Council, only one monetary policy decision, and one President, who is also the porte-parole of the Governing Council,” he told La Stampa.
Weber’s fellow council member, Austria’s Ewald Nowotny, also opposed terminating the program. “It makes sense to use it as a safety belt,” Reuters cited him as saying Oct. 13. “I would not throw it away too early.”
ECB Executive board member Juergen Stark said in an interview with Germany’s Handelsblatt on Oct. 15 that the bank will keep buying government bonds “as long as necessary.” Still, in a speech at the same day he added the bond purchases are “temporary in nature.”
Permanent Aid
In a press briefing in Rimini today, Trichet said setting up a permanent mechanism to aid euro nations in financial difficulty “could be imagined” in the future, when responding to a question whether the European Financial Stability Facility should be extended after expiring in three years. “We would then have to respect a number of criteria. It should not comprehend moral hazard and it should be based on a very, very strong conditionality,” said.
The EFSF was set up in June after Greece’s near default led to soaring borrowing costs for other high-deficit nations such as Portugal, Ireland and Spain. The 440 billion-euro ($614 billion) emergency fund is set to be shut down in June 2013 if no loans are made by then.
Trichet reiterated that the current interest-rate level was “appropriate” and that “excess volatility and disorderly movements” in exchange rates always have adverse implications for economic and financial stability.
Emerging economies also agreed to undertake reforms to enhance exchange rate flexibility, he said in the La Stampa interview. “It is the case for all of them, including for China, which has confirmed the will to engage in such reforms, as it signaled last June.”
Asked in an interview with Italian newspaper La Stampa whether the program didn’t work and should be scrapped, he responded: “No! This is not the position of the Governing Council, with an overwhelming majority.”
Weber, who also sits on the ECB’s decision-making council, said on Oct. 13 that the bond-purchase program should be stopped. The remarks, the strongest from any ECB official advocating a removal of stimulus, came as governments and banks in Ireland, Portugal and Greece struggle to convince investors they can fix their budgets and balance sheets in the aftermath of this year’s sovereign debt crisis.
The ECB started buying bonds in May as part of a European Union-wide push to rescue the euro after the Greek crisis threatened to undermine the 16-nation currency bloc.
“This non-standard measure, like all other such measures, was designed to help restore a more normal functioning of our monetary policy transmission mechanism,” Trichet said, according to a transcript of the interview published on the ECB’s website today.
Weber Frontrunner
Weber is regarded by economists as a frontrunner to succeed Trichet when his non-renewable eight-year term expires in just over a year. Trichet regularly characterizes his job as acting like a spokesman for the ECB’s council.
“There is only one single currency; there is one Governing Council, only one monetary policy decision, and one President, who is also the porte-parole of the Governing Council,” he told La Stampa.
Weber’s fellow council member, Austria’s Ewald Nowotny, also opposed terminating the program. “It makes sense to use it as a safety belt,” Reuters cited him as saying Oct. 13. “I would not throw it away too early.”
ECB Executive board member Juergen Stark said in an interview with Germany’s Handelsblatt on Oct. 15 that the bank will keep buying government bonds “as long as necessary.” Still, in a speech at the same day he added the bond purchases are “temporary in nature.”
Permanent Aid
In a press briefing in Rimini today, Trichet said setting up a permanent mechanism to aid euro nations in financial difficulty “could be imagined” in the future, when responding to a question whether the European Financial Stability Facility should be extended after expiring in three years. “We would then have to respect a number of criteria. It should not comprehend moral hazard and it should be based on a very, very strong conditionality,” said.
The EFSF was set up in June after Greece’s near default led to soaring borrowing costs for other high-deficit nations such as Portugal, Ireland and Spain. The 440 billion-euro ($614 billion) emergency fund is set to be shut down in June 2013 if no loans are made by then.
Trichet reiterated that the current interest-rate level was “appropriate” and that “excess volatility and disorderly movements” in exchange rates always have adverse implications for economic and financial stability.
Emerging economies also agreed to undertake reforms to enhance exchange rate flexibility, he said in the La Stampa interview. “It is the case for all of them, including for China, which has confirmed the will to engage in such reforms, as it signaled last June.”
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