Brussels, 04/10/2012 (Agence Europe) - The European Central Bank (ECB) says that the special “Outright Monetary Transactions” (OMT) unveiled in early September this year have already had a positive effect by reassuring the markets that the euro is here to stay (see EUROPE 10683). “Our decisions as regards Outright Monetary Transactions (OMTs) have helped to alleviate such tensions over the past few weeks, thereby reducing concerns about the materialisation of destructive scenarios. It is now essential that governments continue to implement the necessary steps to reduce both fiscal and structural imbalances and proceed with financial sector restructuring measures,” said ECB president Mario Draghi in Brdo pri Kranju on Thursday 4 October, after a meeting of the ECB Governing Council. Under the OMT programme, the ECB has pledged to buy up unlimited amounts of sovereign bonds of countries finding it difficult to raise capital on the money markets, as long as the countries make an official request for financial aid from the EU.
Draghi gave several examples of positive signals observed since the unveiling of OMTs - interest rates on sovereign debt have fallen since July; Portugal has been able to roll over five-year debt for the first time since the start of its bailout; big European banks and companies have raised substantial amounts of cash; central bank imbalances (Target 2 balances) have been stabilised to an extent; capital flows to Italy have increased; and the use of emergency loans from the Spanish central bank has fallen.
The OMT programme is a way for the ECB to act independently while respecting its mandate, explained Draghi. Because volatility on the markets remains “relatively high,” he urged the eurozone to take action by pursuing structural, financial and budget reform. He refused to comment on whether he thought Spain would need to request financial aid.
In September this year, inflation hit 2.7%, higher than expected, explained Draghi, saying that the bank recapitalisation figures released by the European Banking Authority (EBA) were reassuring (see related article). The ECB decided unanimously to leave eurozone interest rates unchanged. (MB/transl.fl)