ECB will not buy bonds to save profligate states: Draghi

Mon Jun 10, 2013 4:21pm EDT
 
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FRANKFURT (Reuters) - European Central Bank President Mario Draghi said on Monday the organization would not use its yet-to-be-activated bond-buying program to save profligate countries from insolvency, but only to preserve the euro.

The central bank's program has helped calm markets over the past couple of months, but it has raised particular concern in Germany, which is most exposed to potential risks involved as the ECB's largest shareholder.

Draghi spoke on the eve of hearings at Germany's top court to weigh the legality of so-called Outright Monetary Transactions (OMT) program.

"The ECB says if there is a confidence crisis in the euro which is threatening the solvency of the countries not beyond what their fundamentals are, then we are ready to intervene," he said in a video interview with German public broadcaster ZDF.

"But we will not intervene to ensure the solvency of the countries if they are profligate," he said, speaking in English.

The central bank launched the potentially unlimited bond-buying program in September to reduce crisis-stricken countries' borrowing costs and defend the euro.

The German court hearings, to see whether it infringes the constitution's insistence on sovereign parliamentary control over budget matters, take place on Tuesday and Wednesday.

No ruling is expected until after German national elections on September 22.

The ECB has in the past spent less on buying bonds than other major central banks, Draghi said.   Continued...

 
European Central Bank (ECB) President Mario Draghi speaks during the monthly ECB news conference in Frankfurt June 6, 2013. REUTERS/Ralph Orlowski