Brussels, 26/07/2012 (Agence Europe) - The president of the European Central Bank, Mario Draghi, sent a clear message on Thursday 26 July 2012 to the struggling members of the eurozone (like Spain and Italy, which are seeking immediate aid from the ECB, which is the only EU institution capable of taking very speedy action to calm nerves on the sovereign debt markets) when he said that the ECB was prepared to do everything necessary to save the euro. He was speaking at an investor conference in London, where he said that no mistake should be made - “whatever it takes will be done”. His speech was broadcast by Bloomberg TV a week ahead of the next meeting of the ECB Government Council.
Draghi spoke of the option of using monetary policy to influence the sovereign debt market, which is one way for the ECB to get round the ban on direct ECB funding of countries, saying that if sovereign debt risk premiums acted as a handicap on the transmission of monetary policy, then they would come under the ECB's mandate. Moving from this to re-starting the ECB's special sovereign debt buy-up system, which has been on hold for the past four months might be too great a leap given the opposition to it from central banks, like the Bundesbank. Other one-off measures would be do-able, such as greater flexibility for guarantees accepted by the ECB when granting bank loans and issuing bank loans with very long maturity.
Draghi's statements are a breath of fresh air for the money markets, which are concerned about eurozone stability. The yield demanded for long-term sovereign bonds have fallen back and the interest rate for ten-year Spanish bonds fell back below the 7% cut-off point. French Economy Minister Pierre Moscovici said Draghi's comments were wholly positive. The day before, a member of the ECB's Governing Council, Ewald Nowotny of Austria, said that the future European Stability Mechanism could possibly be given a bank licence to give it access to the ECB's vast cash deposits. (MB/transl.fl)