The European Central Bank should ensure any further help it gives to indebted governments in holding down their borrowing costs would come under strict conditions, ECB policymaker Luc Coene said in a newspaper interview.
With the nearly 3-year-old euro debt crisis now threatening Italy and Spain, the bloc’s third and fourth biggest economies, ECB President Mario Draghi has said he will do whatever is required to preserve the euro. His pledge has calmed financial markets this month.
However, with German policymakers in particular concerned that bond-buying risks breaking a taboo on the central bank financing governments, Draghi has hedged his offer to intervene with strict conditions.
In an interview to be published on Saturday, Coene emphasised that any revival of the bond-buying programme that the bank began in 2010 should come with clear obligations on debtor governments to sort out their finances.
“As we experimented with Italy during the summer of 2011, if we take on the pressure of the markets, the pressure on political authorities disappears,” Coene said in the interview with L’Echo and De Tijd, two Belgian business newspapers.
“To say that the central bank will resolve the problem now in intervening without having the guarantee that one would tackle the underlying imbalances is counterproductive,” said Coene, who as Belgium’s central bank governor sits on the ECB’s Governing Council.
Draghi has already agreed to intervene only if countries first apply for aid from the European bailout funds, which will attach conditions to their involvement, and to buy only shorter-dated bonds.
German central bank chief Jens Weidmann has not directly commented on the bond buying plan, although the institution he leads has said it continues to view bond buys critically. No other governing council member has come out against the bond buying plan.