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ECB Warns Bond Buying Conditions are Not Negotiable

The European Central Bank will steadfastly enforce conditions attached to sovereign bond purchases under its program to help euro zone states cut borrowing costs, ECB Governing Council member Luc Coene said.

Coene, also governor of Belgium’s central bank, said any country wanting the ECB’s help via the scheme – under which the central bank would buy potentially unlimited quantities of a struggling country’s bonds – would have to face the consequences.

“If we yield, the ECB will lose all credibility. At a certain moment it will be tough. But this is the line that we have drawn in the sand and we cannot and will not cross it,” Coene told Thursday’s edition of weekly magazine Trends.

Under the program, dubbed outright monetary transactions (OMT), a country would have to apply for aid from Europe’s bailout fund before the ECB intervened.

Such aid would come with conditions, such as implementing economic reforms and hitting budget targets, though the ECB would not be technically obliged to buy the country’s bonds.

“We cannot as central bankers fundamentally solve the problems. We can only buy time for governments to carry out the necessary reforms, reforms that in any

case are forced upon them. If we only buy time without conditions, we will destroy ourselves,” Coene said.

via CNBC [1]

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Alfonso Esparza

Alfonso Esparza [6]

Senior Currency Analyst at Market Pulse [7]
Alfonso Esparza specializes in macro forex strategies for North American and major currency pairs. Upon joining OANDA in 2007, Alfonso Esparza established the MarketPulseFX blog and he has since written extensively about central banks and global economic and political trends. Alfonso has also worked as a professional currency trader focused on North America and emerging markets. He has been published by The MarketWatch, Reuters, the Wall Street Journal and The Globe and Mail, and he also appears regularly as a guest commentator on networks including Bloomberg and BNN. He holds a finance degree from the Monterrey Institute of Technology and Higher Education (ITESM) and an MBA with a specialization on financial engineering and marketing from the University of Toronto.
Alfonso Esparza
Alfonso Esparza

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