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

Ralph Atkins

After eight years, I am leaving Frankfurt to return to London. Following the European Central Bank has meant many thrills and spills. The bank’s history has not yet been written — and it will be years before the dust finally settles. But here is one journalist’s perspective on the highlights — and lowlights.

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The European Central Bank is easily portrayed as stubborn and inflexible.

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In fact, using Latvia’s rebound from deep recession (a near 25 per cent fall in output starting in 2008) as an example, turned out to be a good way for Mr Asmussen to send a pretty uncompromising message to crisis-hit eurozone countries. Read more

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Its conclusions were eye-catching because of the risks involved in the ECB’s massive support for the eurozone’s banking system, which have seen its balance sheet balloon to around €3 trillion. Read more

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Did the Bundesbank last week try to stop life-saving emergency liquidity assistance for Greece’s banks? That would be a reasonable interpretation of noises from Germany’s central bank — and suggests a dangerous game is being played out in Frankfurt.

The Financial Times reported on Tuesday how at least some Greece banks are being kept alive by about €100bn in “emergency liquidity assistance”, a facility meant to be used only by banks in the direst of need. The massive demand followed the ECB’s decision to exclude four Greek banks from its regular liquidity providing operations because of uncertainty over their future financial strength. Read more

Ralph Atkins

Luc Coene, Belgium’s central bank governor, was outspoken on Greece in his interview with the Financial Times. He also revealed a little more on the use of emergency liquidity assistance across the eurozone.

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Ralph Atkins

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ELA is only given in the direst of circumstances, when a bank is no longer eligible to take part in regular liquidity operations, and has to be specially approved by the ECB’s 23-strong governing council in Frankfurt. Read more

Ralph Atkins

A spot of domestic trouble for the European Central Bank: its staff in Frankfurt are demanding protection for their pensions — against inflation.

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Eurozone stability is not quite as secure as it seemed a month ago, just after the second of the ECB’s three year longer-term refinancing operations, which brought the total amount injected into the eurozone financial system to more than €1trn. Spain has challenged the effectiveness of the region’s new “fiscal compact” — seen by Mario Draghi, ECB president, as essential to restoring the eurozone’s credibility. Read more

Ralph Atkins

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Ralph Atkins

Mario Draghi is prepared to take risks — at least with his communication strategy.

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The picture refers back to Bild’s original endorsement of Mr Draghi for the ECB presidency last year, a move which signalled Germans were prepared to accept an Italian in charge of their currency. Read more

Ralph Atkins

Mario Draghi on Thursday faces perhaps his biggest political challenge since he become European Central Bank president in November.

Last week, a leaked letter from Jens Weidmann, Bundesbank president, highlighted rising anxiety at Germany’s central bank over the risks entailed in the ECB’s extraordinary actions to support the eurozone banking system, which have seen it inject more than €1trn in three-year liquidity in recent months.

How Mr Draghi responds to the confrontation at his press conference after Thursday’s governing council meeting could determine the extent to which his stewardship of the eurozone crisis is undermined by Bundesbank resistance.

The dispute could well dominate Thursday’s proceedings: with the ECB still waiting to see the impact of its liquidity measures on the real economy, no change is expected in interest rates. The suspense over Greece’s bail-out is unlikely to have cleared.

Mr Weidmann’s letter created considerable irritation and bewilderment among other members of the ECB’s 23-strong governing council. Read more

Ralph Atkins

Greece’s debt rescheduling has already bitten for some eurozone banks.

The ECB last week demanded €17bn in “margin calls” — the largest amount ever — from banks tapping it for liquidity.

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Another milestone has been reached in European Central Bank history.

Following last week’s three-year longer-term refinancing operation, the size of the ECB’s balance sheet has exceeded €3trn for the first time (ECB, in this context, actually means “eurosystem” — the network of eurozone central banks of which the ECB is part). Its latest financial statement shows a €330.6bn increase in assets compared with last week, which was more or less the same as the increase in lending to eurozone banks.

As such, the ECB has drawn further ahead of the Federal Reserve in terms of the overall size of its balance sheet (see chart below). Read more