European Central Bank action to calm tensions in eurozone bond markets must remain firmly controlled, otherwise the euro’s monetary guardian risks “losing everything we have”, one of its most senior policymakers has warned.
Mario Draghi, Italy’s central bank governor, says in an interview with the Financial Times that large-scale purchases of government bonds could threaten the ECB’s freedom to act without political interference and break European Union rules.
“I’m only too aware that we could easily cross the line and lose everything we have, lose independence, and basically violate the [EU] treaty,” Mr Draghi warns.
His comments highlight the ECB’s determination not to embark on quantitative easing in the style of the US Federal Reserve, but instead increase pressure on eurozone governments to shore up their credibility with financial markets by embarking on credible programmes to keep public finances under control.
“The primary response to a crisis should be a national response – credible fiscal action and structural reforms that relaunch growth,” Mr Draghi says. He insists that “the euro is not in question”.
In his interview, Mr Draghi also reveals that the ECB is discussing “concrete proposals” for dealing with banks that are so weak that they have become dependent on ECB offers of unlimited liquidity. Such steps should form part of the “exit strategy” the ECB is executing to unwind emergency measures introduced after the collapse of Lehman Brothers in 2008.
Published figures show the ECB has spent €69bn ($91bn) on government bonds since the launch of the programme in May, but the total has almost certainly risen in recent days following a decision to step up purchases.