BRDO PRI KRANJU, Slovenia, Oct 4 (Reuters) - The European Central Bank kept its benchmark interest rate at a record low 0.75 percent at a policy meeting on Thursday.
Following are comments by ECB President Mario Draghi at a news conference after the meeting.
“The decision (to apply for aid) is entirely in the hands of governments. The ECB has done what was possible and the OMT would create an environment which is conducive to reforms ... but the initiative is in the hands of governments.”
“OMTs ... have helped to alleviate such tensions (in financial markets) over the past few weeks, thereby reducing concerns about the materialization of destructive scenarios.”
“(It is) essential that governments continue to implement the necessary steps to reduce both fiscal and structural imbalances and proceed with financial sector restructuring measures.”
Asked if the ECB had discussed a rate cut, Draghi said “No”.
“There is a tendency to identify conditionality with harsh conditions ... Conditions don’t need to be necessarily punitive. Actually many of the conditions have to do with structural reforms, which have both social cost, but also great social benefits.
“And if they are well-designed, the second are going to be greater than the first ... That is up to the Spanish government to decide and it is up to the other euro area governments to decide whether the programmes - whether - you know the conditions, you know that it is necessary to make a request to an EFSF/ESM programme.
“We would actively seek the IMF involvement in the process.”
Asked if Spanish yields were appropriate or still hampering monetary policy, Draghi said “I will not comment”.
“If the tradition of the Bundesbank was to assure price stability, the ECB is fully in sync with that tradition.”
Asked if a cut in interest rates was conceivable alongside the bond-buying programme, Draghi said “Non-standard monetary policy measures are being implemented when the standard ones are not fully effective ... We have to see if we can repair the monetary policy transmission channels.”
He also said: “We do not speculate on future interest rate changes.”
“(Rolling over) would qualify as monetary financing. We have said several times that any voluntary restructuring of our holdings would be equivalent - would be monetary financing.”
“The OMT is not meant to induce strategic response in favor of issuing short terms by the issuers , so this will be monitored.”
“OMTs will not take place while a given programme is under review and would resume after the review period once programme compliance has been assured.”
“The OMT would not apply to countries that are under a full adjustment program until... complete market access will be obtained and this is because the OMT is not a replacement for lack of primary market access.”
“Let me repeat again what I have said in past months. We are strictly within our mandate to maintain price stability over the medium term. We act independently in determining monetary policy and the euro is irreversible.”
“Economic growth in the euro area is expected to remain weak with ongoing tensions in some euro area financial markets and high uncertainty still weighing on confidence and sentiment.”
“Owing to high energy prices and increases in indirect taxes in some euro area countries, inflation rates are expected to remain above 2 percent throughout 2012, but then to fall below that level again in the course of next year.”
“Current levels of inflation should thus remain transitory and not give rise to second round effects. We will continue to monitor closely further developments in costs, wages and prices. Risks to the outlook for price developments continue to be broadly balanced over the medium term.” (London Desk +44 207 542 4441)