ECB targets bundled-debt market to boost economy

Thu Oct 2, 2014 11:58am EDT
 
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By Gavin Jones

NAPLES Italy (Reuters) - The European Central Bank laid out plans on Thursday to buy rebundled packets of debt within weeks to shore up the flagging euro zone economy and its president said the bank would do more if needed.

It was, nonetheless, one of the last arrows in the ECB's quiver before the broad buying of assets known as quantitative easing.

Just months after unveiling a multi-pronged attack to help the economy, with cheap bank loans, lower interest rates and a pledge to buy reparceled debt, President Mario Draghi insisted the ECB had been making progress.

"We've done a lot," Draghi told reporters in the southern Italian city of Naples as protesters nearby paraded banners saying: 'Free us from the ECB!'

"Just go back with your memory to the last three years, even four or five years. We've done really a lot to improve the financing conditions. And now, of course, we are waiting," he said, commenting on a long-awaited improvement in lending.

Draghi, speaking after the central bank's governors had decided to keep interest rates unchanged at just 0.05 percent, also urged euro zone countries to keep up with budget targets, just days after France announced a budget that would flout them.

He outlined an ECB program to buy reparceled debt known as asset-backed securities as well as covered bonds, secured on solid assets such as property, and raised the prospect of bolstering this market and, in turn, lending.

It is a scheme that will start in mid-October for covered bonds, with other purchases of asset backed securities following before the end of the year. Draghi said the potential 'universe' for the type of debt that the ECB was interested in was up to 1 trillion euros, although ECB buys may not be that high.   Continued...

 
A huge euro logo is pictured next to the headquarters of the European Central Bank (ECB) before the bank's monthly news conference in Frankfurt August 7, 2014.    REUTERS/Ralph Orlowski