Monday

18th Dec 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 for a 30 day free trial.

  1. €150 per year
  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.

Facebook to shift ad revenue away from Ireland

Public pressure about low corporate taxes appear to have pressured Facebook to launch plans to stop routing international ad sales through its Dublin-based headquarters in Ireland.

News in Brief

  1. EU adopts 'track-and-trace' tobacco system
  2. Luxembourg appeals Amazon tax decision
  3. EU leaders agree to open phase 2 of Brexit talks
  4. Juncker: May made 'big efforts' on Brexit
  5. Merkel took 'tough' line on Russia at EU summit
  6. EU leaders added line supporting 'two-state' solution
  7. EU leaders agree to 20 European Universities by 2024
  8. Belgian courts end legal proceedings against Puigdemont

Stakeholders' Highlights

  1. Dialogue PlatformThe Gülen Community: Who to Believe - Politicians or Actions?" by Thomas Michel
  2. Plastics Recyclers Europe65% plastics recycling rate attainable by 2025 new study shows
  3. European Heart NetworkCommissioner Andriukaitis' Address to EHN on the Occasion of Its 25th Anniversary
  4. ACCACFOs Risk Losing Relevance If They Do Not Embrace Technology
  5. UNICEFMake the Digital World Safer for Children & Increase Access for the Most Disadvantaged
  6. European Jewish CongressWelcomes Recognition of Jerusalem as the Capital of Israel and Calls on EU States to Follow Suit
  7. Mission of China to the EUChina and EU Boost Innovation Cooperation Under Horizon 2020
  8. European Gaming & Betting AssociationJuncker’s "Political" Commission Leaves Gambling Reforms to the Court
  9. AJC Transatlantic InstituteAJC Applauds U.S. Recognition of Jerusalem as Israel’s Capital City
  10. EU2017EEEU Telecom Ministers Reached an Agreement on the 5G Roadmap
  11. European Friends of ArmeniaEU-Armenia Relations in the CEPA Era: What's Next?
  12. Mission of China to the EU16+1 Cooperation Injects New Vigour Into China-EU Ties

Latest News

  1. Catalonia, Brexit, and Uber on EU agenda This WEEK
  2. Macron and Merkel take tough line on Poland
  3. Eurozone future needs structural reforms, EU leaders told
  4. Showdown EU vote on asylum looking likely for next June
  5. EU stresses unity as it launches next phase of Brexit talks
  6. Polish PM ready for EU sanctions scrap
  7. Dutchman to lead powerful euro working group
  8. EU mulls post-Brexit balance of euro and non-eurozone states