OMT best left unused – ECB’s Coene

European Central Bank Governing Council member Luc Coene said he would prefer the ECB’s as-yet- untapped bond-buying program to stay that way.

“The ideal situation would be for the OMT never to be used,” Coene said in an interview at the World Economic Forum in Davos, Switzerland, on Jan. 26, referring to the Outright Monetary Transactions program. “It’s like a nuclear deterrent. Whenever you use it, that will raise new questions and new issues,” such as the risk that governments would then ease off austerity measures, he said.

No country has yet asked for a bailout that could trigger bond buying by the ECB after President Mario Draghi’s rescue plan, announced in July, ended a wave of panic in euro-region debt markets. Countries have so far balked at asking for aid because any assistance from the ECB would require them to sign up to a program of reform and potentially more austerity.

Coene, who heads Belgium’s central bank, said it’s now up to governments to generate growth in the euro area as the debt crisis shows signs of receding. The ECB “cannot solve the underlying problems,” he said.


This article is for general information purposes only. It is not investment advice or a solution to buy or sell securities. Opinions are the authors; not necessarily that of OANDA Corporation or any of its affiliates, subsidiaries, officers or directors. Leveraged trading is high risk and not suitable for all. You could lose all of your deposited funds.