The European Central Bank should keep the option to buy government bonds in place for now, while markets should react positively to Europe's bank stress tests, ECB Governing Council member Ewald Nowotny said today.
The ECB's purchases of government bonds have come to a near halt in the last few weeks as debt markets began to recover from a seizure induced by worries over some euro zone borrowers.
"As the data show, the bond buying program has been reduced to more or less zero. Of course I think it makes sense to have it in place as a security measure, but technically it is not active just now," Mr Nowotny said
Mr Nowotny, who heads Austria's central bank, backed Europe's banks to glide through keenly anticipated stress tests, whose results are due to be published on Friday.
"I can assure you that from our intentions and expectation ... we think that markets will react positively to the stress tests."
"I think they are strict and serious I observe that some groups have a tendency to raise doubts which is completely unfounded."
He also brushed off fears that the recent jump in the rates euro zone banks charge each other in lending markets could have an impact on the region's recovery.
"We have reduced the liquidity in the banking sector in the last couple of weeks. This has not led to any imbalances," he said, adding that the ECB was not concerned about the rise.
Reuters