Mario Draghi raises the curtain on the new anti-crisis plan of the European Central Bank. In the press conference at the end of the Governing Council at the beginning of the month, the president of the ECB announced that the board of the Institute “has developed the OMT (direct monetary transactions) for the sovereign bonds of Euroland. We must be in a position to safeguard the singleness of our monetary policy and ensure transmission throughout Euroland. OMTs will allow us to eliminate distortions in bond markets that arise from unfounded fears. We will have a mechanism to prevent destructive scenarios. I want to repeat that we will maintain price stability in the medium term and that the euro is irreversible”.
This is the main one of the "extraordinary measures" announced last week by Draghi in an editorial in the German periodical "Die Zeit": unlimited (but "conditional") purchases of bonds from one to three years on the secondary market of the countries that request them. But "there are no specific objectives" with regard to spreads: in short, precise levels at which to trigger the mechanisms.
The purchase of bonds will be conditional on a macroeconomic adjustment programme of the countries concerned. The ECB will act subject to the green light from the EFSF, the bailout fund, and subsequently from the ESM, the future rescue mechanism. Only one board member voted against this new plan. Draghi did not want to reveal who it was, but it is easy to imagine who it is Jens Weidmann, president of the Bundesbank.
The ECB president has also promised to ease the need for guarantees required of banks.
During the speech by the president of the ECB all the main European stock exchanges continue to travel positive by more than one point and lo spread Btp-Bund travels below the threshold of 390 basis points.
Shortly before the Eurotwer had communicated of have not made any changes to interest rates, thus remaining at an all-time low of 0,75%.
“To restore confidence, leaders will have to push for fiscal consolidation – Draghi insisted again -. Governments will have to be ready to activate the EFSF respecting all conditions. The adherence of governments to their commitments is absolutely necessary”.
Draghi also announced that in the euro area "economic growth remains weak", while "the high level of uncertainty undermines general confidence". “The renewed escalation of market tensions has the potential to undermine growth. Inflation it should fall below 2% again in 2013, but uncertainty remains”.
The ECB also has cut forecasts for economic growth again in the euro area: for 2012 a drop in GDP is expected of between minus 0,2% and minus 0,6%. And for 2013, a decrease of between 0,4 and 1,4 percent.
