Friday

18th Aug 2017

ECB under pressure on bond-buying

Pressure is mounting on the European Central Bank (ECB) ahead of a key meeting on Thursday (6 September), when it is expected to shed more light on a controversial bond-buying plan aimed at helping Spain and Italy.

"The ECB is the bazooka, the firepower, the muscle, the one that has the capacity to impress upon the markets," said Angel Gurria, a Mexican economist chairing the Paris-based Organisation for Economic Cooperation and Development - a club of the world's most developed economies.

Thank you for reading EUobserver!

Subscribe now and get 40% off for an annual subscription. Sale ends soon.

  1. €90 per year. Use discount code EUOBS40%
  2. or €15 per month
  3. Cancel anytime

EUobserver is an independent, not-for-profit news organization that publishes daily news reports, analysis, and investigations from Brussels and the EU member states. We are an indispensable news source for anyone who wants to know what is going on in the EU.

We are mainly funded by advertising and subscription revenues. As advertising revenues are falling fast, we depend on subscription revenues to support our journalism.

For group, corporate or student subscriptions, please contact us. See also our full Terms of Use.

If you already have an account click here to login.

Asked by newswires whether the ECB should buy Italian and Spanish bonds in order to lower their borrowing costs, he said: "Yes, they should. If you ask when, the answer is the sooner the better."

Burria spoke on the sidelines of a conference in Slovenia's lakeside resort of Bled on Sunday.

"We have passed the question of moral hazard, these are performing countries [in terms of reforms], now it is the system that is at stake," he added.

Despite support from several leading economists, the bond-buying move still lacks backing from the ECB's most influential member - the German Bundesbank.

Last week, Bundesbank chief Jens Weidmann said in an interview that bond-buying can become "addictive like a drug" to governments and undermine reform activity.

German economy minister Philipp Roesler, the leader of the liberal Free Democratic Party in Germany, also told the Rheinische Post in an interview out on Monday that: "Bond purchases cannot remain a permanent solution as they drive the danger of inflation."

He added: "ECB president Mario Draghi has pointed out himself that only structural reforms in individual countries can secure the competitiveness and stability of our currency, not bond purchases."

For his part, Spanish Prime Minister Mariano Rajoy over the weekend told several newspapers, including Germany's mass-selling Bild, that he would only make a formal request for financial assistance once the ECB sheds more light on its bond-buying plan.

"We're going to await the decisions of the European Central Bank and on the basis of that we'll make a decision that, today, has still not been made. But if I believe it's good for all of Europe, for the euro and for Spain, I’ll make it and, if not, I won't," Rajoy said.

"If the [requirements] of the ECB are positive, I will present the aid request, if not, I won't."

The prime minister defended his track record on reform, saying "you will not find any government that, in the first eight months of its mandate, has changed so many things as mine."

On Friday, his government met the first deadline under the terms of a €100 billion bailout for its banking sector when it approved a package of laws required by the EU commission. The move including the creation of a 'bad bank' to deal with failed loans and mortgages.

Meanwhile, the country's fourth largest lender, Bankia, on Friday reported €4.5 billion losses, in line with what the government had estimated after taking over the lender in May.

Bankia is set to be the first bank to get money from the eurozone bailout, most likely in November, to the tune of €4-5 billion, the Wall Street Journal reports.

The ECB's Draghi is to meet with MEPs on Monday ahead of the bank's own gathering later this week. But the parliamentary hearing is to be held behind closed doors.

Agenda

ECB showdown on bond-buying plan THIS WEEK

A keenly-awaited meeting of the European Central Bank board on Thursday will have to reconcile the details of a bond-buying plan aimed at helping Spain and Italy with the fundamental opposition to the scheme within Germany's Bundesbank.

Airbnb too 'different' to pay EU tax

US home rental firm said its “model is unique” because most of the money stays in pockets of local people, as France and Germany prepare EU tax crackdown.

EU cautious with German diesel plan

The European Commission welcomed the German carmakers' pledge to update software in diesel cars, but is waiting for details on how emissions will be reduced.

News in Brief

  1. Macedonia sacks top prosecutor over wiretap scandal
  2. ECB concerned stronger euro could derail economic recovery
  3. Mixed Irish reactions to post-Brexit border proposal
  4. European Union returns to 2 percent growth
  5. Russian power most feared in Europe
  6. Ireland continues to refuse €13 billion in back taxes from Apple
  7. UK unemployment lowest since 1975
  8. Europe facing 'explosive cocktail' in its backyard, report warns

Stakeholders' Highlights

  1. European Healthy Lifestyle AllianceDoes Genetics Explain Why So Few of Us Have an Ideal Cardiovascular Health?
  2. EU2017EEFuture-Themed Digital Painting Competition Welcomes Artists - Deadline 31 Aug
  3. ACCABusinesses Must Grip Ethics and Trust in the Digital Age
  4. European Jewish CongressEJC Welcomes European Court of Justice's Decision to Keep Hamas on Terror List
  5. UNICEFReport: Children on the Move From Africa Do Not First Aim to Go to Europe
  6. Centre Maurits CoppietersWe Need Democratic and Transparent Free Trade Agreements Says MEP Jordi Solé
  7. Counter BalanceOut for Summer, Ep. 2: EIB Promoting Development in Egypt - At What Cost?
  8. EU2017EELocal Leaders Push for Local and Regional Targets to Address Climate Change
  9. European Healthy Lifestyle AllianceMore Women Than Men Have Died From Heart Disease in Past 30 Years
  10. European Jewish CongressJean-Marie Le Pen Faces Trial for Oven Comments About Jewish Singer
  11. ACCAAnnounces Belt & Road Research at Shanghai Conference
  12. ECPAFood Waste in the Field Can Double Without Crop Protection. #WithOrWithout #Pesticides

Latest News

  1. UK’s childhood obesity strategy, a blueprint for EU countries?
  2. Death toll rising from Barcelona attack
  3. Austrian soldiers to stop migrants from Italy
  4. Chinese road to riches or road to ruin?
  5. UK seeks 'unprecedented' Irish border deal
  6. Merkel: No EU sanctions on migrant quota rebels
  7. UK keen to keep old EU customs deal
  8. Italy backs Libya as NGOs chased out of Mediterranean