ECB Bond-Buying Won’t Solve Spain, Italy Woes, Coene Says
11 August 2012, by Rebecca Christie and John Martens (Bloomberg)
http://www.bloomberg.com/news/2012-08-11/ecb-bond-buying-won-t-solve-spain-italy-woes-coene-says.htmlExcerpt:European Central Bank bond purchases won’t solve Spain and Italy’s difficulties maintaining investor confidence, ECB Governing Council member Luc Coene said in an interview with De Tijd and L’Echo.
Bond yields have been rising because financial markets don’t trust Spanish and Italian authorities to take the measures necessary to repair their economies, Coene said in the interview, published today in the two Belgian newspapers.
As a result, he predicted few benefits from any ECB action.
“It makes no sense for the ECB to start financing those countries,” said Coene, who also heads Belgium’s central bank.
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It would only lead to the ECB taking on the whole public debt of Spain and Italy onto its balance sheet.
That would in turn weaken the ECB and do nothing to resolve the underlying problems,” he was quoted as saying.
Coene told the newspapers that the central bank’s experience a year ago demonstrates why the ECB should remain reluctant to step in.
“We haven’t forgotten what happened in August of last year: We bought Italian bonds and right after that the Italian government reneged on its pledges,” he was quoted as saying.
“The conclusion is clear: When you take away the market pressure, you take away the pressure on politicians to act.”
Spanish two-year yields climbed yesterday to the highest level in a week amid speculation an ECB plan to buy the debt of so-called peripheral nations won’t be enough to stem the financial crisis.
