Thursday August 21, 2014 Search
Weather | Athens
32o C
25o C
News
Business
Comment
Life
Sports
Community
Survival Guide
Greek Edition
Draghi said to seek German support on bond sterilization

By Jana Randow

European Central Bank President Mario Draghi would only consider ending the sterilization of crisis-era bond purchases if he’s openly backed by the Bundesbank, according to two euro-area central bank officials familiar with the debate.

Ending the liquidity drain would add almost 180 billion euros ($243 billion) to the euro-area financial system at a time when officials are trying to curb volatility in money markets and official interest rates are close to zero.

Draghi said he would contemplate asking ECB policy makers to halt the absorption of liquidity from the now-terminated Securities Markets Program if the Bundesbank helps sell the move to the German public, the people said, asking not to be identified because the deliberations are private. Sterilizing bond purchases typically neutralizes their impact on money supply, curbing inflation risks.

Enlisting the Bundesbank to convince the German public of a change in the terms of the SMP may be Draghi’s defense strategy against the kind of backlash his predecessor Jean-Claude Trichet experienced when he announced the program in 2010. Then-Bundesbank President Axel Weber criticized the measure on the same day, saying it posed “significant” risks.

A spokesman for the ECB declined to comment yesterday. The Bundesbank supports ending the liquidity absorption and has deliberated on the measure in the ECB’s monetary-policy and market-operations committees, a central-bank official told Bloomberg on Jan. 31.

Market watch

Ending the liquidity drain, which started with the bond purchases during the financial crisis, would more than double excess liquidity in the system. That could help to curb volatility in market interest rates and reduce banks’ incentive to keep cash at the ECB rather than lend it on. Draghi has said the Frankfurt-based institution is ready to act if money-market rates are unwarranted or the outlook for inflation worsens.

The central bank has failed for the past two weeks to sterilize SMP purchases in a sign that lenders may be reluctant to park cash at the central bank amid tighter funding conditions. Excess liquidity, money not immediately needed by banks to meet their obligations, fell to 168 billion euros on Jan. 31 from 813 billion euros two years ago.

Overnight interbank borrowing costs surged above the ECB’s benchmark interest rate last month, rising as high as 0.36 percent on Jan. 20. The rate stood at 0.14 percent yesterday. Inflation in the currency bloc unexpectedly slowed to 0.7 percent in January, compared with the ECB’s target of just under 2 percent.

The ECB’s Governing Council next meets to set monetary policy on Feb. 6. Policy makers kept the main rate at a record low of 0.25 percent in January after a surprise cut in November. [Bloomberg]

ekathimerini.com , Tuesday February 4, 2014 (11:42)  
Eurozone business growth slows in July, prices fall: PMI
Merkel cites euro’s ‘construction flaws’ as economy sputters
Greek stocks post rise of 0.99 percent
Banks reject stress test concerns
Culture Ministry tells Ancient Amphipolis visitors not to expect tours
Archaeologists excavating a large burial mound in northern Greece have asked politicians and others seeking guided tours of the site to leave them in peace. The Culture Ministry appealed for...
Elderly man remanded in custody over son´s murder
A 75-year-old man accused of the murder of his son 39-year-old son whose burned remains were discovered in a car near the town of Astros in the Peloponnese last Friday was remanded in custod...
Inside News
SOCCER
Greek soccer officials in refereeing probe to face prosecutor on Sept 15
Eleven soccer officials were on Wednesday given until September 15 before they have to face prosecutor Aristidis Koreas, who is investigating allegations that the draws to decide which match...
ATHLETICS
Long jumper Tsatoumas takes Greece´s second silver at European Championships
Greece won its second medal at the European Athletics Championships in Zurich, Switzerland, on Sunday with Louis Tsatoumas coming second in the long jump. Briton Greg Rutherford won the even...
Inside Sports
COMMENTARY
Self-destructing political system
It finally seemed as if we had found some peace of mind. The vast majority of Greek MPs chose to abstain from festivities on August 15, also known as Assumption Day, thus sparing us from the...
EDITORIAL
Welcome movement
Many have spoken about the need to spur economic growth in this debt-wracked country, but very few officials seem to actually be doing anything meaningful to make this happen. Recent weeks h...
Inside Comment
SPONSORED LINK: FinanzNachrichten.de
SPONSORED LINK: BestPrice.gr
 RECENT NEWS
1. Culture Ministry tells Ancient Amphipolis visitors not to expect tours
2. Elderly man remanded in custody over son´s murder
3. Inspectors visit Rhodes to probe reports of mass food poisoning of hotel guests
4. Avramopoulos in US for talks with Hagel on possible Greek role in peace missions
5. Three held on Rhodes over human trafficking accusations
6. Elderly parents face Nafplio magistrate over murder of son
more news
Today
This Week
1. Merkel cites euro’s ‘construction flaws’ as economy sputters
2. Brussels warns Greece over plans to allow construction near Korinos beach
3. Second man held over double murder in Mani
4. Eurozone business growth slows in July, prices fall: PMI
5. Avramopoulos in US for talks with Hagel on possible Greek role in peace missions
6. Three held on Rhodes over human trafficking accusations
Today
This Week
1. Carved sphinxes at Ancient Amphipolis tomb will not be removed
2. Treating Amphipolis with care
3. Canada’s fiscal adjustment has lessons for Greece
4. Greece to offer law on restructuring bad loans next month
5. Greece’s recession eases as country nears end to six-year slump
6. Ministry sys ‘no’ to debt collection agencies
   Find us ...
  ... on
Twitter
     ... on Facebook   
About us  |  Subscriptions  |  Advertising  |  Contact us  |  Athens Plus  |  RSS  |   
Copyright © 2014, H KAΘHMEPINH All Rights Reserved.