Hightlights - Draghi comments at ECB news conference

By @ibtimes on

Following are comments by European Central Bank President Mario Draghi at a news conference after the bank kept its benchmark interest rate at 1 percent on Thursday.

DISTRIBUTING PROFITS OF ECB BOND MKT OPERATIONS

If the ECB gives money to govt that's monetary financing. If the ECB distributes part of the profits to its member countries as part of the key capital key that is not monetary refinancing.

SELLING BONDS TO EFSF

The EFSF is like governments, if you give money to governments, that is like monetary financing ... If you make a loss on these sales, this is monetary financing.

ON INTEREST RATES

We frankly didn't discuss any prospective or current change in interest rates.

ON GREECE

On Greece, I'm sorry to say I cannot say anything about how our holdings of Greek bonds, both under the SMP programme and under national central banks' (...) holdings will be treated.

What I can say, however, is something that a few minutes ago I got a call from the Prime Minister of Greece saying that an agreement has been reached and has been endorsed by the major parties.

This afternoon we will be having a euro group meeting with the ministers, and we will be having a full report of this, the agreement, and also a discussion of the further steps.

The second thing is the PSI. On that, as you know, we are not in the negotiation parties but the vibrations that we getting are that the different parties are pretty close to an agreement.

ASKED IF OPTIONS FOR GREECE ARE LEGAL TRICKS

Absolutely that is still my position and so you can rest assured that this is my position, if all these talks about the ECB having the losses, it's unfounded. But I can't say what we can do for this until tonight after the Eurogroup.

A PLAN B FOR GREECE?

We never have Plan B, Plan B means defeat already so I'm actually quite confident that ... all the pieces of this will fall in the proper places and as I said before I don't want to comment about ECB holdings because I really want to see what comes out of the Eurogroup tonight.

ASKED IF WILL HOLD GOVT BONDS IN SMP PROGRAMME TO MATURITY

We have no reason to change this commitment. If we do, we will tell you.

ASKED IF FISCAL COMPACT IS STEP IN RIGHT DIRECTION

It is a sign that the euro is a strong reality and if one is bold one would say it is the first timid step towards a fiscal union ...

ON A JAPANESE CURRENCY INTERVENTION

Interventions ought to be assigned, if they are needed, they should be done in multilateral frameworks they should not be unilateral.

TAKE-UP OF NEW LTRO

The specialists in this field think it should be substantial, and possibly around the level of the previous one.

TOO SOON TO JUDGE LTRO

It is not yet possible to draw firm conclusions from these developments, particularly given that the impact of the first three-year LTRO on bank funding is still unfolding and may not have been fully reflected in the most recent bank lending survey.

NEW COLLATERAL RULES

Sure, it's going to be more risky. Does that mean that we take more risk? Yes, it means we take more risk. Does it mean this risk is being unmanaged? No, it is being managed. And it's being - it's going to be managed very well because really there will be a strong overcollateralization for the additional credit claims. The conditions will be very stringent.

ASKED ABOUT TIGHT LENDING CONDITIONS

We are indeed concerned by this slowing down in credit.

ASKED IF MORE UPBEAT ON ECONOMY

Well, I wouldn't say we are confident ... We come from a very weak fourth quarter. But we have seen a stream of both surveys and hard data that seem to point to a stabilization of economic activity at (a) low level.

This outlook is subject to downside risks. They notably relate to tensions in euro area debt markets and their potential spillover to the euro area real economy. Downside risks also relate to possible adverse developments in the global economy , higher than assumed increases in commodity prices, protectionist pressures, and the potential for a disorderly correction of global imbalances.

We expect the euro area economy to recover very gradually in the course of 2012. The very low short-term interest rates and all the measures taken to force the proper functioning of the euro area financial sector are lending support to the euro area economy.

INFLATION

Inflation is likely to stay above 2 percent for several months to come, before declining to below 2 percent.

PRICE RISKS BROADLY BALANCED

Risks to the medium-term outlook for price developments remain broadly balanced.

PRICE STABILITY

It is essential for monetary policy to maintain price stability for the euro area as a whole. This ensures a firm anchoring on inflation expectations in line with our aim of maintaining inflation rates below but close to 2 percent over the medium term. Such anchoring is a prerequisite for monetary policy to make its contribution to supporting economic growth and job creation in the euro area.

(London Treasury Desk)

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