FRANKFURT
— Financial markets appeared unruffled by an invective from
European Central Bank head Mario Draghi. He said the bank is ready to
intervene in the bond market to drive down countries' high borrowing
rates, and urged European leaders to get their bailout fund ready to
intervene as well.
The
bank could buy bonds if the borrowing rates stop the ECB in its
efforts to spread its low interest rates throughout the 17 countries
that use the currency, Mr. Draghi said today.
The
move could lower the borrowing rates that are threatening to push
Spain and Italy into financial disaster.
The
ECB "may undertake outright open market operations of a size
adequate to reach its objective," Draghi said.
Draghi
announced no immediate action. "Over the coming weeks, we will
design the appropriate modalities for such policy measures."
An
earlier ECB intervention was not big enough to impress bond markets.
The effort, which began in May 2010, has been left unused since March
because it did not decisively lower borrowing costs.
Highlights
from the speech:
—
"What is the
meaning of irreversibility? Irreversibility means it cannot be
reversed — so you don't go back to the lire or the drachma....
That's what means. It stays. It is pointless to bet against the euro.
It is pointless to go short on the euro. That's the message. It's
pointless because the euro will stay."
—
"It is within
our mandate to do whatever is within our power to preserve the euro
as a stable currency."
—
"The eurozone
is a strong place in the world and the euro is a strong currency, and
it's irreversible. That's the substance of the speech I gave in
London. Today, we're not rowing back. There was an endorsement by the
governing council of the speech. "
—
"We don't plan
any presentation of our monetary policy discussions to the heads of
state. It's not been discussed. The point is, we are independent and
we don't foresee presentations to the heads of state of our monetary
policy measures."
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