ECB ruled out 'printing money' to ease crisis
"Portugal and Greece are not on the same boat, and this is very visible when you look at the facts and figures," said European Central Bank president Jean-Claude Trichet. Picture: Getty Images
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THE governing council of the European Central Bank did not even discuss the idea of buying government bonds to ease the European debt crisis, ECB president Jean-Claude Trichet said after the monthly policy-setting meeting yesterday.
Several analysts have put forward the idea, which would be similar to the policies of the US Federal Reserve and the Bank of England. But the inflationary implications of "printing money" is expected to provoke strong German opposition to any such idea.
Market speculation about possible bond purchases would not be dispelled by Mr Trichet's comment that the ECB had the capacity "to take rapid, unconventional decisions, as shown in the case of Greece", said Austin Hughes, chief economist at KBC Bank in Dublin.
Lisbon Treaty
"The Lisbon Treaty forbids direct purchases from governments but the ECB could in theory purchase bonds on the secondary market from investors," he said.
He noted the comment that the decision to drop the minimum credit rating requirement for bonds used by banks as security for short-term ECB loans was carried "by an overwhelming majority".
"Although this may seem a minor distinction, Mr Trichet's repeated emphasis on the unanimous nature of the ECB's analytical judgments on Greece hints that some on the governing council have serious misgivings about providing additional assistance to Greece," Mr Hughes said.
Bundesbank president Axel Weber has already said the Greek fiscal crisis did not justify "using every means" at the ECB's disposal, such as buying bonds.
Mr Trichet played down fears of contagion, where the Greek problems spread to other countries.
"Portugal and Greece are not on the same boat, and this is very visible when you look at the facts and figures," he told reporters after the meeting, held in Lisbon as part of the council's regular visits to euro area capitals.
Policymakers
"Portugal is not Greece. Spain is not Greece," Mr Trichet said.
"Europe's policymakers have been behind the curve and there's a risk that the ECB won't do anything because they feel it's too soon to act," Ken Wattret, chief euro region market economist at BNP Paribas in London, told Bloomberg.
"But something desperately needs to be done to inject confidence into markets that are running out of control."
There was no surprise in the fact that the ECB left interest rates unchanged at 1pc, but there was also no suggestion that the ECB would consider cutting rates in response to the crisis.
"In the nervousness that is gripping markets at present, it is only slightly unfair to suggest that, if the ECB is not seen as part of the solution, it is regarded as part of the problem," Mr Hughes said.
- Brendan Keenan
Irish Independent
