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ECB chief defends controversial bond purchase scheme

Last Updated: Tuesday, June 11, 2013 - 09:08

Frankfurt: European Central Bank chief Mario Draghi defended one of his key anti-crisis measures Monday, saying it did not overstep the bank's mandate.

Speaking on German television a day before Germany's highest court was scheduled to examine the controversial OMT bond purchase programme, Draghi rejected concerns that the scheme was effectively a way of printing money to pay for government debts.

"It will only come into action if confidence in the euro fails, not to finance states," Draghi told ZDF public television.

"We won't intervene to ensure a country's solvency," he said.

A country can still be allowed to become insolvent, Draghi insisted.

Draghi's remarks come just a day before the German Constitutional Court is scheduled to begin two days of hearings tomorrow to decide whether the bond purchase programme -- known as Outright Monetary Transactions -- is compatible with Germany's Basic Law.

Ever since the ECB unveiled the OMT to buy up the sovereign debt of the euro area's most debt-wracked members last summer, fears of a break-up of the single currency have indeed receded.

Europe's storm-battered financial markets have enjoyed a period of relative calm, without a single OMT ever being carried out.

Nevertheless, like many of the ECB's emergency anti-crisis measures, the OMT has its critics -- both in the pro-euro and anti-euro camps -- who claim it oversteps the ECB's mandate and is unconstitutional.

The plaintiffs, a diverse group of German politicians, lawyers and citizens, argue the ECB is creating risks for German taxpayers that their elected representatives cannot control.

But Draghi insisted today that the "risks for German taxpayers are much less than they were a year ago."


First Published: Tuesday, June 11, 2013 - 09:04
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