Daily Archives: August 2, 2012

Ralph Atkins

Mario Draghi. Image by Getty.

Mario Draghi. Image by Getty.

Hello and welcome to the live blog on ECB president Mario Draghi’s press conference.

The ECB’s monetary policy statement is due at 12.45. Mr Draghi’s press conference begins 45 minutes later.

All times are UK time.

14.54 This live blog is now closed.  Here are the main take-aways.

- The ECB could restart government bond buying – but there is no immediate intervention. The ECB “may undertake outright open market operations of a size adequate to reach its objectives,” Mr Draghi announced.

- But a “necessary condition” is that governments “stand ready” to activate EFSF/ESM’s bond buying tools. That would give the ECB political cover to act.

- No limit set to the size of possible ECB intervention. That’s a big difference to the ECB’s previous bond buying programme, which was described as “limited”.

- Financial markets are disappointed at the lack of immediate intervention. Spanish ten-year bond yields are above 7 per cent again.

- The ECB could also undertake “further non-standard monetary policy measures,” Mr Draghi said, without giving further details.

- The modalities of the ECB’s enhanced crisis response will be designed “over the coming weeks”.

- The Bundesbank opposed ECB bond buying, Mr Draghi acknowledged. That means it could still be an obstacle in weeks to come, undermining the ECB’s effectiveness.

- “The euro is irreversible,” Mr Draghi said.

- The main policy interest rate was left unchanged at 0.75 per cent.

 

14.53 Here is some scepticism from BNP Paribas.

The ECB did not change its monetary policy nor did it provide us with details about possible future actions. Stress on sovereign debt markets has to be addressed and the ECB could help. But once more, the ECB through the ball back in the politicians’ court. A restart of the SMP is possible, but distressed countries have to request help from the EFSF/ESM first…

14.47  Holger Schmieding, European analyst at Berenberg Bank, is more upbeat than financial markets:

“Draghi has delivered. And Germany should say thank you for that. Although the ECB did not start to actually intervene in bond markets today, Draghi sent a strong message that the ECB will do all it takes, including interventions in sovereign bond markets…This can stop the gradual slide of the German economy into recession and allow the overall Eurozone economy to return to growth around the turn of the year, with Germany likely to enjoy strong growth again next year.”

14.42   The lack of immediate action by the ECB has disappointed markets. Mary Watkins writes:

By mid afternoon, yields on 10-year Spanish debt were up 19 basis points at 6.91 per cent, while yields on benchmark Italian debt were 24bp higher at 6.17 per cent.

Spain’s Ibex index was up nearly 5 per cent, while Italy’s FTSE MIB was more than 3 per cent higher.

 14.32 The press conference is now over.

14.30 There will be “full disclosure” under the ECB’s revamped bond buying progamme, Mr Draghi said. Does that mean it will say how much of each countries bonds it has bought?

14.28 Mr Draghi explains what he meant by his statement that  the euro had to be “irreversible”. “It says ‘it is pointless to bet against the euro’.”

14.24 Here’s a good summary of the press conference so far for the Twitterati…

[blackbirdpie url="https://twitter.com/chrisadamsmkts/status/231015670219956226"]

14.22  By focusing bond buying on the shorter end of the yield curve, the ECB would remain consistent with “classical monetary policy,” Mr Draghi said. That was in response to a question about whether targeting longer term rates might have been of more help for the real economy.

14.20  Mr Draghi is keen to stress the sequencing: activation of the EFSF/ESB bond buying  instruments is a “necessary condition” for an ECB response, he argued. Actions by governments would be “as essential” as ECB action to restore its monetary policy transmission mechanism.

14.19 Julian Callow, European economist at Barclays, writes in a note:

We interpret this as a clear sign that the ECB is prepared to change policy significantly at its September meeting, in terms of purchasing debt without claiming seniority subject to the EFSF being deployed to buy government debt. Overall this is in line with our expectation; it still will depend on whether Spain and Italy (which have a summit now proceeding) will call upon the EFSF to do this.

14.15 Here is the FT’s updated news story Read more