Trichet Says Majority of Council Backs Bond Purchases

Discussion in 'Wall St. News' started by ASusilovic, Oct 17, 2010.

  1. Oct. 17 (Bloomberg) -- European Central Bank President Jean-Claude Trichet said the “overwhelming majority” of the bank’s 22-member Governing Council still backs government bond purchases, rebuffing a call from Bundesbank President Axel Weber to terminate the program.

    Asked in an interview with Italian newspaper La Stampa whether the program didn’t work and should be scrapped, he responded: “No! This is not the position of the Governing Council, with an overwhelming majority.”

    Weber, who also sits on the ECB’s decision-making council, said on Oct. 13 that the bond-purchase program should be stopped. The remarks, the strongest from any ECB official advocating a removal of stimulus, came as governments and banks in Ireland, Portugal and Greece struggle to convince investors they can fix their budgets and balance sheets in the aftermath of this year’s sovereign debt crisis.

    The risk of “exiting too late” is greater than the danger of “exiting too early,” said Weber in a speech in New York.

    The ECB started buying bonds in May as part of a European Union-wide push to rescue the euro after the Greek crisis threatened to undermine the 16-nation currency bloc.

    “This non-standard measure, like all other such measures, was designed to help restore a more normal functioning of our monetary policy transmission mechanism,” Trichet said, according to a transcript of the interview published on the ECB’s website today.

    Trichet as Spokesman

    Weber is regarded by economists as a frontrunner to succeed Trichet when his non-renewable eight-year term at the ECB expires in just over a year. Trichet regularly characterizes his job as acting like a spokesman for the ECB’s council.

    “There is only one single currency; there is one Governing Council, only one monetary policy decision, and one President, who is also the porte-parole of the Governing Council,” he told La Stampa.

    Weber’s fellow council member, Austria’s Ewald Nowotny, also opposed terminating the program. “It makes sense to use it as a safety belt,” Reuters cited him as saying Oct. 13. “I would not throw it away too early.”

    ECB Executive board member Juergen Stark said in an interview with Germany’s Handelsblatt on Oct. 15 that the bank will keep buying government bonds “as long as necessary.” Still, in a speech at the same day he added the bond purchases are “temporary in nature.”

    Trichet also reiterated that the current interest-rate level was “appropriate” and that “excess volatility and disorderly movements in exchange rates always have adverse implications for economic and financial stability.”

    Weber, off. I am da Boss in the house ! :D :D :D