European Central Bank president Mario Draghi has defended his bond-buying programme after critics suggested it was preventing eurozone members from carrying out vital economic reforms.
Draghi unveiled the ECB’s outright monetary transactions plan in August 2012, following his now-famous comments that the central bank would do “whatever it takes” to prevent the eurozone from collapsing.
However, critics of the plan – which has yet to be activated but has been credited with lowering the borrowing costs for troubled periphery countries such as Spain and Italy – argue that it has reduced the pressure for debt-laden eurozone members to reform their economies.
Speaking at the 2013 International Monetary Conference in Shanghai, Draghi noted that the OMT would only be activated if a eurozone member had requested a bailout and agreed to undertake necessary reforms.
“They can either reform without OMTs and retain economic sovereignty or they can reform with OMTs but give up some of their economic sovereignty. Either way, they have to persevere in their reform efforts,” he said.
“So it is quite misleading to compare OMTs to historical episodes in which governments relied on central bank support to replace fiscal consolidation.”