Bloomberg News

Nowotny Says ECB Not Discussing Reviving Bond Purchases

May 29, 2012

European Central Bank Governing Council Member Ewald Nowotny said, “The ECB has done a number of measures that were very helpful and efficient for the economy. We are now in a situation where we have to see how these measures have worked in the economy, especially in long-term operations.” Photographer: Oliver Bunic/Bloomberg

European Central Bank Governing Council Member Ewald Nowotny said, “The ECB has done a number of measures that were very helpful and efficient for the economy. We are now in a situation where we have to see how these measures have worked in the economy, especially in long-term operations.” Photographer: Oliver Bunic/Bloomberg

European Central Bank Governing Council member Ewald Nowotny said the bank isn’t considering restarting its bond-purchase program to stem rising borrowing costs for governments in the euro area.

“This for the time being is not a matter of discussion,” Nowotny told reporters in Belgrade today, when asked if bond purchases are something the ECB is contemplating. “The ECB has done a number of measures that were very helpful and efficient for the economy. We are now in a situation where we have to see how these measures have worked in the economy, especially in long-term operations.”

Spanish Prime Minister Mariano Rajoy last week called on the ECB to buy his government’s bonds, after yields on the debt approached the level that pushed Ireland, Greece and Portugal to request international bailouts. While the ECB has bought 212 billion euros ($266 billion) of government debt since May 2010, it halted the program this year after injecting more than 1 trillion euros into the financial system through long-term loans.

Nowotny also said that the “prime objective” is to keep Greece in the euro area, adding that this is “something that doesn’t only depend on the side of the European authorities, but also on the decisions of Greek people and their government.”

Asked whether the ECB is preparing an exit plan, he said that “it’s a good rule for a central bank to be prepared for everything, but that doesn’t mean it has to talk about it.”

Spain’s government bonds declined today after a spokesman for the economy ministry said the nation’s preferred option for raising funds to recapitalize Bankia group is via debt markets.

The yield on five-year securities climbed eight basis points to 5.82 percent at 11:04 a.m. London time. The 10-year rate climbed three basis points to 6.51 percent.

Nowotny said that “rescuing banks is the responsibility of national governments” and “the role of the ECB is in the field of liquidity, not solvency.”

To contact the reporter on this story: Gordana Filipovic in Belgrade at gfilipovic@bloomberg.net

To contact the editor responsible for this story: James M. Gomez at jagomez@bloomberg.net


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