Friday

7th May 2021

ECB in nuanced denial of yield cap plans

  • ECB chief Mario Draghi - holding the answer to the eurozone crisis? (Photo: World Economic Forum)

The European Central Bank has failed to outright deny that a bold plan for the bank to bring eurozone government borrowing costs is in the offing.

The Frankfurt-based bank said it was “absolutely misleading to report on decisions which have not yet been taken and also on individual views, which have not yet been discussed by the ECB’s governing council."

Read and decide

Join EUobserver today

Become an expert on Europe

Get instant access to all articles — and 20 years of archives. 14-day free trial.

... or subscribe as a group

But the statement implies that the idea to put caps on bond yields - reported in Germany's Der Spiegel - may yet be debated.

According to the report, the bank is considering setting up country-by-country thresholds for sovereign bond yields, after which it would intervene by buying up the stricken states's bonds. The benchmark would be German bonds, seen as the safest in the eurozone.

The idea is extremely sensitive. It is likely to raise complaints that the ECB is overstepping its mandate. It is also set to aggravate a fear - particularly among fiscally prudent states such as Germany - that ailing eurozone countries will lose the incentive to carry out reforms.

A spokesperson for the German finance ministry was quick to criticise the idea.

Saying he was unaware of any such plans, the spokesperson added that "purely theoretically and speaking in the abstract, such an instrument would of course be very problematic."

It is "also wrong to speculate on the shape of future ECB interventions," he said, according to AFP.

Consideration by the bank on how to overcome the crisis come as the borrowing costs for Spain and Italy have in recent weeks been pushed to near unsustainable levels, with investors doubting in the longterm future of the single currency.

Some analysts have suggested that the ECB - with its theoretically limitless capacity to print money - holds to the solution to the eurozone crisis, which has lasted over two years, seen the toppling of several governments, and is now threatening core economies.

An editorial in the Financial Times Deutschland suggests that the interest capping rate idea differs from previous proposed solutions in that it offers a "sustainable" way to stem the crisis.

Germany gets its way on ECB bond-buying

The ECB has said it "may" buy Spanish and Italian bonds, but only if governments first sign reform pledges with the eurozone's bailout fund - a German demand.

Merkel under pressure over ECB banking union role

Angela Merkel is coming under mounting pressure from the Bundesbank and the sister party of her Christian Democrat group to block EU plans to make the European Central Bank the central supervisor of a eurozone banking union.

News in Brief

  1. Israel study: Two Pfizer doses give over 95% protection
  2. Barnier calls Johnson a 'bulldozer' in Brexit memoirs
  3. Hungary and Poland prevent 'gender' in summit declaration
  4. Draghi: Italy to welcome foreign tourists from mid-May
  5. Germany announces new, stricter, emission cuts
  6. Channel Islands 'blockade' threat in UK and France row
  7. French reporter kidnapped by rebels in Mali
  8. Trump's Facebook ban upheld but with caveats

Vietnam jails journalist critical of EU trade deal

A journalist who had demanded the EU postpone its trade deal with Vietnam until human rights improved has been sentenced to 15 years in jail. The EU Commission says it first needs to conduct a detailed analysis before responding.

Stakeholders' Highlights

  1. Nordic Council of MinistersNordic Council enters into formal relations with European Parliament
  2. Nordic Council of MinistersWomen more active in violent extremist circles than first assumed
  3. Nordic Council of MinistersDigitalisation can help us pick up the green pace
  4. Nordic Council of MinistersCOVID19 is a wake-up call in the fight against antibiotic resistance
  5. Nordic Council of MinistersThe Nordic Region can and should play a leading role in Europe’s digital development
  6. Nordic Council of MinistersNordic Council to host EU webinars on energy, digitalisation and antibiotic resistance

Latest News

  1. Greek prisons accused of abusing detainees
  2. EU and US join up against China on Taiwan
  3. Conservatives' Covid-strategy wins in lockdown-fatigue Madrid
  4. Commission drafts new rules targeting foreign state aid
  5. Why Europe should stop worrying about 'sportswashing'
  6. Conference on Future of Europe must listen to local voices
  7. What happens now to the EU's post-Covid recovery fund?
  8. EU turns from China to India on free trade

Join EUobserver

Support quality EU news

Join us