The animated discussion sparked by an article in Der Spiegel on ECB's plans to limit bond yields, has been cooled down in the European afternoon by the central bank itself which officially denied the rumors. Also the German Finance Ministry said it knew nothing of such project.
Martin Kotthaus, a spokesman for the Finance Ministry told reporters that he was "not aware of any such plans and haven't heard anything.” He said that “in purely theoretical, abstract terms, such an instrument would certainly be very problematic,” adding however that he knew nothing of it.
The ECB said in an email that it was "absolutely misleading to report on decisions, which have not yet been taken and also on individual views, which have not yet been discussed by the ECB's Governing Council, which will act strictly within its mandate."
"As far as recent statements by government officials are concerned, it is also wrong to speculate on the shape of future ECB interventions," it was stated in the email. "Monetary policy is independent and undertaken strictly within the ECB mandate."
EU crisis meetings the focal point of the week
As European leaders one by one return from their holidays, successive meetings are already being scheduled, their main topic being the current delicate situation in Greece and Spain. There have also been reports of the ECB planning to establish limits on yields.
In an attempt to convince EU leaders to ease the bailout terms for Greece, PM Antonis Samaras will hold talks with Eurogroup chief Jean-Claude Juncker on August 22, with German Chancellor Angela Merkel on August 24 and with French President Francois Hollande the following day. Angela Merkel will also meet with Francois Hollande in Berlin on Thursday.
Due to a positive result of a debt auction held recently by the Greek Treasury it is expected that the country will be able to repay 3.8 billion euros of debt to the ECB on Monday. The Troika inspectors will return to Athens at the beginning of September in order to continue the evaluation of the country's bailout program.
Meanwhile, speculation on ECB's willingness to set limits on bond yields is rising on Monday. Spanish Finance Minister Luis de Guindos told the WSJ during the weekend that the central bank cannot make such a move. ING analyst Padhraic Garvey also believes that “this is unlikely, but it is also clear that the ECB are closer to doing something more dramatic in order to contain things.”
As far as Spain is concerned, the main focus will be on the government meeting scheduled for Friday when the bank restucturing plan will be extensively discussed. In the same interview for WSJ Luis de Guindos assured that the 30 billion euro emergency aid payment for banks is not necessary at the moment an it is expected that the disbursement will take place in November.
ECB considering cap on EZ sovereigns yields - Der Spiegel
Spiegel reported over the weekend that based on unsourced data, "the ECB is considering to establish in its future bond purchases interest rate levels for each country. Thus, it would buy sovereign debt of the crisis countries whenever interest rates exceed a certain spread to German Bunds... At its next meeting in early September, the Governing Council will decide whether the interest rate target is actually installed."
The measure may potentially fend off troubled economies from seeing the long end of its yield curve widen past a particular level. The ECB should determine what interest level considers appropriate. That would discourage speculators from pushing yields above the level set by the euro zone's central bank, the magazine said.
The report comes after ECB President Mario Draghi suggested earlier this month that in order for debt markets to return back to stable levels, a resumption of the bond buying government debt program may be needed; Any intervention, however, would be subject to governments requesting financial support aka a bailout from the euro zone safety net, which in turn would be linked to conditions.
German Finance Minister Wolfgang Schaeuble on Saturday rejected the idea of financing state debt via the European Central Bank: "If we start doing that, we won't stop. It's like when you start trying to solve your problems with drugs," he said.
Spiegel said, with quotes via Reuters, "the ECB wants to make its bond purchases more transparent in future and plans to start announcing the volume of its sovereign bond purchases immediately after buying them. At present the bank announces each Monday how much money it spent on bond purchases during the previous week."