Tradervox.com (Dublin) - Mario Draghi, the European Central Bank President has indicated that the region’s governments will not get help from the bank until they fulfill all the prerequisite requirements. In his speech last week after the ECB meeting in Slovenia, Draghi said that ECB will not intervene until governments like Spain agree to the conditions of the Outright Monetary transactions (OMT), popularly known as the bond-buying program. He also indicated that the bank will not agree to take losses from the Greek debt restructuring hence dampening growing speculation of interest rate cut.
Jacques Cailloux, the Chief European Economist in London at Nomura International Plc, said that the message from the ECB President is that he is not willing to do more for the time being. The ECB is showing that it is ready to intervene is need arises but its preferred situation would be not to intervene. The message shifts the blame of failure to intervene from Draghi to Spain, requiring that the country request for bailout and agrees to the conditions of the OMT. Draghi’s statement was discussed by prime ministers from Spain, Italy and France, when they met on Friday last week. The market is now waiting to see what Mariano Rajoy, the Spanish Prime Minister will do to alleviate the growing concerns.
Blaming the governments from the affected countries, Draghi said that the ECB is ready to offer help at any time when the request is formalized. He noted that the asset purchases program has already lowered borrowing cost for governments across the region. Draghi praised Spanish Prime Minister, Mariano Rajoy for his progress in addressing the problems in the country, saying that the conditionality of the OMT doesn’t necessary have to be harsh. Spain is receiving a lot of pressure from investors and EU to request for bailout. Spain is already receiving 100 billion euros to help its financial institutions and it looks set to cede control of its economic fate to European partners as it seeks help to shore up sovereign finances.