Draghi defends bond purchases to German MPs

 
Julian Harris
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EUROPEAN Central Bank (ECB) chief Mario Draghi faced a two hour grilling from German politicians in the Bundestag yesterday, yet took the opportunity to defend the central bank’s debt-buying plans.

Struggling Eurozone states will have their borrowing costs weighed down by the ECB snapping up their bonds, it announced last month, so long as they accept international aid along with strict conditions.

Yet the move is unpopular in Germany, where many people are opposed to what they see as a central bank printing money in order to let indebted governments off the hook.

Draghi rebutted the main accusation against the Outright Monetary Transactions (OMTs), however.

“OMTs will not lead to disguised financing of governments,” Draghi said. “They will take place solely on secondary markets, where bonds that have already been issued are traded. If interventions take place, they will involve buying government debt from investors, not from governments.”

The ECB President added: “Second, OMTs will not compromise the independence of the ECB ... Third, OMTs will not create excessive risks for euro area taxpayers ... Fourth, OMTs will not lead to inflation.”

The move is within the ECB’s mandate, Draghi insisted.