Saturday

30th Sep 2023

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.

IEA says: Go green now, save €11 trillion later

The International Energy Agency finds that the clean energy investment needed to stay below 1.5 degrees Celsius warming saves $12 trillion [€11.3 trillion] in fuel expenditure — and creates double the amount of jobs lost in fossil fuel-related industries.

Opinion

How do you make embarrassing EU documents 'disappear'?

The EU Commission's new magic formula for avoiding scrutiny is simple. You declare the documents in question to be "short-lived correspondence for a preliminary exchange of views" and thus exempt them from being logged in the official inventory.

Latest News

  1. EU women promised new dawn under anti-violence pact
  2. Three steps EU can take to halt Azerbaijan's mafia-style bullying
  3. Punish Belarus too for aiding Putin's Ukraine war
  4. Added-value for Russia diamond ban, as G7 and EU prepare sanctions
  5. EU states to agree on asylum crisis bill, say EU officials
  6. Poland's culture of fear after three years of abortion 'ban'
  7. Time for a reset: EU regional funding needs overhauling
  8. Germany tightens police checks on Czech and Polish border

Stakeholders' Highlights

  1. Nordic Council of MinistersThe Nordic Region is stepping up its efforts to reduce food waste
  2. International Medical Devices Regulators Forum (IMDRF)Join regulators, industry & healthcare experts at the 24th IMDRF session, September 25-26, Berlin. Register by 20 Sept to join in person or online.
  3. UNOPSUNOPS begins works under EU-funded project to repair schools in Ukraine
  4. Georgia Ministry of Foreign AffairsGeorgia effectively prevents sanctions evasion against Russia – confirm EU, UK, USA
  5. International Medical Devices Regulators Forum (IMDRF)Join regulators & industry experts at the 24th IMDRF session- Berlin September 25-26. Register early for discounted hotel rates
  6. Nordic Council of MinistersGlobal interest in the new Nordic Nutrition Recommendations – here are the speakers for the launch

Join EUobserver

Support quality EU news

Join us