Published December 06, 2012
FRANKFURT – The European Central Bank will not aim with its new OMT bond-purchase program to eliminate the premium over benchmark German Bunds that some governments pay to borrow on the market, ECB policymaker Benoit Coeure said on Thursday.
Spanish Prime Minister Mariano Rajoy has said he wants assurances that ECB intervention under the program would bring down Spain's debt yields [ID:nE8E8KL00K].
But ECB President Mario Draghi has refused to commit to any targets for bringing down Spanish borrowing costs, and Coeure reinforced that message.
"The ECB does not aim to eliminate all spreads between sovereign bond issuers because sovereign yields don't have to be identical in a monetary union, and market discipline has a role to play," Coeure said in the text of a speech for delivery in Frankfurt.
"Nor is the ECB willing to purchase any amount of sovereign bonds necessary to balance governments' inter temporal budget constraints," he said, adding that "governments retain the responsibility of balancing their budgets over the medium term and the ECB remains free to set interest rates so as to ensure the maintenance of price stability over the medium term."
The ECB has not yet bought any sovereign debt under its new program -- dubbed Outright Monetary Transactions (OMT) -- because Spain, which is seen as most likely to become the first country to make use of the new support measure, has not yet fulfilled the precondition of asking for help from the euro zone's rescue fund.
(Writing by Paul Carrel)