Strasbourg, 09/06/2011 (Agence Europe) - On Thursday 9 June, the European Central Bank (ECB) decided unanimously to keep interest rates unchanged (1.25% for the main refinancing operations, 2% for the marginal loan facility and 0.5% for the deposit facility). Announcing the decisions, the ECB president, Jean-Claude Trichet, used vocabulary usually seen as hinting that a rate rise was imminent (possibly in July 2011). He said the situation was such that there might be a rise in rates at the next meeting of the Governing Council to discuss inflation. He said any decision would be taken at the right time and would not be an indication of further rate rises in the future. For the first time since 2008, the ECB decided in April this year to increase interest rates by 0.25% (see EUROPE 10354).
The ECB's line on inflation is driven by its analysis of the eurozone economic situation. In the second quarter of this year, the eurozone will continue to grow and the Eurosystem's forecast this month suggests GDP growth in the eurozone will be between 1.5% and 2.3% in 2011 and between 0.6% and 2.8% in 2012. The March 2011 growth forecasts for this year have been revised down, said Trichet. The Eurosystem forecasts that inflation will be between 2.5% and 2.7% in the eurozone in 2011 and between 1.1% and 2.3% in 2012. This is an increase on the March 2011 forecasts, largely due to increased fuel prices.
The ECB has decided to leave unchanged for the next three months its special and ordinary bank refinance measures.
Greece. Jean-Claude Trichet hammered home the ECB's view of the sovereign debt crisis in Greece, saying the bank was opposed to any restructuring or write-down of the Greek debt. He said the eurozone would be making a huge mistake if it took decisions that would lead to the flight of capital by private investors who owned Greek bonds (a credit event). If the eurozone were to take action that led to Greece going bankrupt, then the ECB would act accordingly and might restrict access to cheap ECB cash for Greek banks and refuse to accept Greek bonds as guarantee. Trichet warned that the bank would apply the bank solvency and collateral quality rules. He refused to comment on whether he thought the German idea of extending the maturity of Greek bonds to seven years was likely to generate a “credit event” (see EUROPE 10394). Some observers believe that the ECB's views about private investors taking a hit if Greek bonds are written down is party due to the ECB's strong exposure to Greece. Trichet said that privatisation was a very good way of mobilising private capital and would help get the economy on a sound footing. Greece has been instructed to speed up its privatisation programme (due to bring in some €50 billion by 2015) in order to have the cash to respect its budget commitments and therefore be granted the next batch of aid, some €12 billion.
Draghi. The Governing Council has informed the other EU institutions that it has no objection to the appointment of the current governor of the Banca d'Italia, Mario Draghi, as the new head of the ECB, taking over from Jean-Claude Trichet in November 2011. (M.B./transl.fl)