ECB rules out more aggressive moves to avert crisis
Published 11/11/2011 | 05:00
THE European Central Bank simply cannot intervene any more aggressively in the eurozone debt crisis, key figures in the Frankfurt-based bank said yesterday.
The ECB is under growing pressure from world leaders to do more to address the crisis which has now engulfed Italy.
Dutch central bank president Klaas Knot, a member of the ECB's 23-member Governing Council, led the fresh ECB resistance.
"We have gone pretty far in what we can do but there is not much more that can be expected from us," Mr Knot told the Dutch parliament. "It is now up to the governments . . . to make sure the doubts about sustainability, about repayment of individual government debt are removed as quickly as possible."
Mr Knot's comments echoed a warning to European governments from German ECB policymaker Juergen Stark late on Wednesday not to rely on the bank's help.
Italian borrowing costs have shot past 7pc -- the point at which Portugal and Ireland were forced to seek bailouts -- despite ECB buying of the country's debt.
The borrowing costs slipped back to just below 7pc yesterday but remained in dangerous territory, and with no agreement on how to scale up the eurozone's rescue fund, the ECB is the only plausible defender for now.
A eurozone official said the bloc was not making any plans to bail out Italy, which is deemed too big to save with the €440bn European Financial Stability Facility. A second said the hope was that the ECB would be forced to act more forcefully.
Despite the intensification of the crisis, the ECB has not delivered the kind of 'shock and awe' intervention that could calm markets. The bank is reluctant to take more risk on to its books.
"The more risk we take on, the more difficult it will be to neutralise the effects from this money creation. Then we land at the quadrant where we would have put on the money printing press," Mr Knot said.
The situation is complicated because Italy's Mario Draghi has succeeded France's Jean-Claude Trichet at the ECB's helm and the new president does not want to be seen as going soft on his home country.