Sunday

29th May 2016

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."

Dear EUobserver reader

Subscribe now for unrestricted access to EUobserver.

Sign up for 30 days' free trial, no obligation. Full subscription only 15 € / month or 150 € / year.

  1. Unlimited access on desktop and mobile
  2. All premium articles, analysis, commentary and investigations
  3. EUobserver archives

EUobserver is the only independent news media covering EU affairs in Brussels and all 28 member states.

♡ We value your support.

If you already have an account click here to login.

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.

Finance ministers baulk at tax-avoidance rules

Member states will discuss again in June a proposed directive to outlaw practices used by large companies to avoid paying taxes. Meanwhile, the European Parliament makes progress on its probe of Panama Papers.

News in Brief

  1. Syrian refugees sue Denmark over immigration law
  2. Ukraine bans Gorbachev for backing Crimea's seizure
  3. Dozens dead in two shipwrecks outside Libya
  4. Slovak PM says his country is no place for Muslims
  5. Juncker's spin-doctor warns of populist 'horror'
  6. EU urges Hungary to end discrimination of Roma children
  7. Majority of voters think UK will stay in EU
  8. Leading MEP says Greek bailout will not work

Stakeholders' Highlights

  1. ACCAEducation and Training 2020 - Giving Young People the Workplace Skills They Need
  2. EPSUTrade Unions Back New Undeclared Work Platform
  3. European Healthy Lifestyle AllianceCould targeting children’s fitness boost academic performance?
  4. World VisionDeclares the World Humanitarian Summit a Positive Step in a Longer Journey to Ending Need
  5. EJCPresident Dr. Moshe Kantor on Brexit and the Jewish Question
  6. Swedish EnterprisesNew rules for posted workers - Better Protection or the End of Posting ?
  7. World VisionWhy The EU Needs to Put Children at the Centre of Emergencies - In Their Words
  8. ACCASustainability Reporting in Danger of Losing Its Momentum Says ACCA and CDSB
  9. Dialogue PlatformDiversity as Heritage of Humanity! Join the “Colors of the World“ Show at the EP
  10. Centre Maurits CoppietersNew Responses to the Basque Peace Process? MEP Juaristi on Stateless Challenges Conference
  11. European Healthy Lifestyle AllianceImproving Cardiovascular Health Begins by Closing the Gap in Sex Disparities
  12. IPHRBrussels Talks to Take Stock of Human Rights in Turkmenistan