Draghi is explicitly calling on governments to “stand ready to activate the EFSF.” In order for the EFSF to start buying bonds of individual countries, these nations must make a request for help. He said the ECB ‘may undertake outright open market operations’ and ‘may take further non standard measures.’ He gave no hint’s though on what would be considered non standard. With respect to the issue of ECB bond buying, immediately putting them on a higher level than other bondholders, he said ‘investor concerns on seniority will be addressed.’ By talking cautiously on the euro economy and playing down an inflation concerns, the ECB is ready to go if needed. There is no talk however of giving the ESM a bank license at some point, which would be the large pot of money that many dream of for halting the rise in bond yields. Bottom line, Draghi laid out what the markets realistically thought he would, nothing more.
On the question of the ESM getting a bank license one day, Draghi sort of punted that question back to the 17 euro zone members by saying ‘its not up to the ECB to give a banking license…it’s up to governments.’ And he said, ‘the current ESM design doesn’t (legally) allow it as a counterparty’ to the ECB. On the likelihood of more ECB bond purchases, he was not saying they would definitely be sterilized which is the 1st time Draghi hinted that Fed like money printing is a possibility. This would fall under their desire to do ‘whatever it takes.’
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