The ECB resumes the purchase of debt but only of Portugal and Ireland
The entity will inject liquidity into European banks and hold an auction on August 11, six months
Trichet suggests that further increases in interest rates will be necessary after leaving them unchanged at 1.5%
Frankfurt (Germany) (Editorial Office / Agencies) .- Neither Italy nor Spain. Apparently, the European Central Bank is only buying debt from already rescued states such as Ireland and Portugal, but it is not doing so with Spanish or Italian bonds, the most punished of the last few days by the markets. The decision of the ECB, suggested by its governor, Jean-Claude Trichet , has severely punished the Spanish stock markets – the Ibex-35 has closed below 8,700 points – and Italian and the risk premium – the differential between the profitability that it pays for the Spanish and German bonds to attract the buyer – from both countries, which again come close to 400 basis points.
The ECB has bought sovereign bonds from Portugal and Ireland, said three operators, according to EFE Dow Jones. The decision would represent the first time that the ECB has applied the public debt purchase program of euro area countries since last March.
Trichet made it clear this afternoon by ensuring that the bank maintains the public debt purchase program, although he did not specify whether it has carried out acquisitions recently.
After keeping interest rates in the eurozone intact by 1.5% and hinting that further rate hikes will be necessary, Trichet also announced that the ECB will lend commercial banks the liquidity they need for six months in a row. extraordinary operation, due to the current tensions in the markets.
“I would not be surprised if the end of this press conference confirmed the possibility of buying back European bonds from the ECB,” said Trichet in Frankfurt.
Trichet limited himself to saying that the ECB will publish, as usual, what he has done and refused to comment on rumors in the markets that he was buying debt during the press conference.
The ECB publishes on Monday the weekly volume of public debt acquired in the secondary market.
Despite tensions in the fixed income markets, the ECB has not bought public bonds from countries that share the euro since the end of March, for eighteen weeks.
In May of last year, the European Monetary Authority began this program to purchase public debt to help countries that are facing refinancing difficulties and has so far acquired bonds worth around 75,000 million euros.
More types increases
Trichet also hinted that more interest rate increases are needed but according to Commerzbank’s chief economist, Jörg Krämer, he will refrain from doing so if the sovereign debt crisis worsens. “We also assume that the ECB will buy large-scale government bonds if the finance ministers do not act fast enough to help Spain and Italy,” Krämer said.
During the press conference, the president of the ECB considered that the monetary policy is still “accommodative”, and assured that the government council will observe “very closely the upward risks for price stability”, words with which In the past it has indicated that it will raise interest rates in the medium term, which could be in October.
Previously, the governing council of the ECB decided unanimously to maintain its governing rate at 1.5%, the interest rate at which it lends the money to commercial banks in all these refinancing operations.
The European Financial Stability Facility (EFSF), which is endowed with only 440,000 million euros and would therefore be insufficient for a possible rescue of countries the size of Spain or Italy, will be able to buy debt in the primary and secondary markets once the Council of the European Union (EU) modify the framework agreement in October.
Trichet announced that the entity will lend to commercial banks all the liquidity they need for six months in an extraordinary operation, due to the resurgence of tensions in some financial markets in the euro area.
In addition, the ECB will provide the banks with all the liquidity they need for another quarter, until January 17, 2012, in their main refinancing operations, the weekly auctions and in special refinancing operations until the end of the first quarter of next year.
Trichet stressed that there has been a slowdown in the pace of economic growth in the euro area countries in recent months, after having posted strong growth in the first quarter due to special factors.
The president of the ECB also added that uncertainty about economic growth is high.