Mario Draghi, president of the European Central Bank, ignored calls for his institution to play a greater role in resolving the eurozone sovereign debt crisis yesterday and instead asked why European governments have not yet delivered on their own commitments.
Referring to last month's agreement by eurozone leaders to increase the powers of the single currency bloc's €440bn (£378bn) European Financial Stability Facility bailout fund, he asked: "Where is the implementation of these long-standing decisions?"
Mr Draghi, speaking at a European banking conference in Frankfurt, argued the primary purpose of the ECB was to safeguard price stability, implying that unorthodox measures such as pledging to backstop individual governments would jeopardise that goal. He said: "Gaining credibility is a long and laborious process... but losing credibility can happen quickly."
Jens Weidmann, head of Germany's Bundesbank and an ECB governing board member, was more explicit than Mr Draghi in rejecting demands for the central bank to play a greater role.
Mr Weidmann told the Frankfurt conference: "The lack of success in containing the crisis does not justify overstretching the mandate of the central bank and making it responsible for solving the crisis."
This message was echoed by another ECB board member, Jose Manuel Gonzalez-Paramo, who – speaking in Spain – argued: "The sovereign debt crisis is primarily the responsibility of governments."
The strongest pressure on the ECB to play a greater role in the crisis has come from the French government, which proposed that the central bank should lend to the EFSF.
Other governments have called for the ECB simply to commit to buying up the bonds of European states in whatever quantities are needed to allow them to borrow at sustainable rates.
The German government of Angela Merkel has blocked both proposals. Earlier this week, Ms Merkel said: "If politicians think the ECB can solve the euro crisis, then they are mistaken".
The ECB has bought about €187bn in eurozone sovereign bonds since the crisis began last May in an attempt to stabilise bond markets. And there have been reports of it buying Italian bonds (which have come under unprecedented pressure) over the past week. But the ECB has always stressed the temporary nature of this programme and it is eager for the eurozone bailout fund to take over this stabilisation role. The yield on Italian 10-year bond yields fell to 6.7 per cent yesterday and the rate on equivalent Spanish sovereign debt fell to 6.4 per cent.
However, earlier this week Madrid had to pay almost 7 per cent at an auction of 10-year bonds, which is close to levels that saw other eurozone nations forced to seek external bailouts.
And fear remains elevated among debt market investors. Josef Ackermann, chief executive of Deutsche Bank, admitted to the Frankfurt conference that banks are still experiencing a difficulties borrowing on the capital markets.
He said: "Short-term financing is fine, but the big question is how we can ensure long-term funding. The willingness of investors to make long-term investments in banks is not very pronounced."
The Greek finance minister, Evangelos Venizelos, added his voice to those calling for Mr Draghi to intervene more in the crisis. He said: "The ECB, like every central bank, must help the eurozone overcome the crisis, in every possible way."Reuse content