The European Central Bank frequently discusses the possibility ending the purchase of Italian government bonds in case it concludes Italy is not adopting promised reforms, said Yves Mersch, an ECB governing council member.
If we observe that our interventions are undermined by a lack of efforts by national governments, then we have to pose ourselves the problem of the incentive effect, Mersch said according to extracts of an interview with Italian daily La Stampa to be published on Sunday.
Asked if this meant the ECB would stop buying Italy's bonds if it did not adopt reforms it has promised to the European Union, Mersch, who heads Luxembourg's central bank, replied: If the ECB board reaches the conclusion that the conditions that led it to take a decision no longer exist, it is free to change that decision at any moment. We discuss this all the time.
Since the ECB resumed its bond-buying program around three months ago, it has purchased some 100 billion euros of government bonds, a majority of which are thought to be Italian securities.
Mersch said the ECB did not want to become a lender of last resort to help the Eurozone solve its debt crisis and said it was concerned that its job could be made more difficult by governments that don't meet their responsibilities.
Our job is not to remedy the errors of politicians, he said.
Mersch also defended the right of Italian Lorenzo Bini Smaghi to remain on the ECB board even though this means Italy now has two members and France has none, much to the annoyance of French President Nicolas Sarkozy.
He [Bini Smaghi] has an eight-year mandate, the treaties do not say that if someone comes from a specific Treasury ministry he has a right to a place on the ECB board, he said.
The spirit of the treaties is that everyone leaves his passport in the wardrobe when he participates in ECB meetings.
(Reporting By Gavin Jones)