Ladies and gentlemen, the Vice-President and I are very pleased to welcome you to our press conference. We will now report on the outcome of today’s meeting of the Governing Council, which was also attended by the Commission Vice-President, Mr Rehn.
Based on our regular economic and monetary analyses, we decided to keep the key ECB interest rates unchanged. The information that has become available since mid-January broadly confirms our previous assessment. Inflation is likely to stay above 2% for several months to come, before declining to below 2%. Available survey indicators confirm some tentative signs of a stabilisation in economic activity at a low level around the turn of the year, but the economic outlook remains subject to high uncertainty and downside risks. The underlying pace of monetary expansion remains subdued. Looking ahead, it is essential for monetary policy to maintain price stability for the euro area as a whole. This ensures a firm anchoring of inflation expectations in line with our aim of maintaining inflation rates below, but close to, 2% over the medium term. Such anchoring is a prerequisite for monetary policy to make its contribution to supporting economic growth and job creation in the euro area. A very thorough analysis of all incoming data and developments over the period ahead is warranted.
Through our non-standard monetary policy measures we will continue to support the functioning of the euro area financial sector, and thus the financing of the real economy. Since the first three-year longer-term refinancing operation (LTRO) was conducted in December 2011 we have approved specific national eligibility criteria and risk control measures for the temporary acceptance in a number of countries of additional credit claims as collateral in Eurosystem credit operations, which should lead to an increase in available collateral. Further details will be provided in a press release to be published today at 3.30 p.m. At the start of the current reserve maintenance period on 18 January 2012 the reserve ratio was reduced, freeing up additional collateral. As stated on previous occasions, all our non-standard measures are temporary in nature.
Let me now explain our assessment in greater detail, starting with the economic analysis. Real GDP growth in the fourth quarter of 2011 is likely to have been very weak. According to the survey data for the last two months, there are tentative signs of a stabilisation in economic activity at a low level. Looking ahead, we expect the euro area economy to recover very gradually in the course of 2012. The very low short-term interest rates and all the measures taken to foster the proper functioning of the euro area financial sector are lending support to the euro area economy. Moreover, stress in financial markets has diminished in response to our monetary policy measures, but also in response to the progress made towards a stronger euro area governance framework and intensified fiscal consolidation in several euro area countries. However, subdued global demand growth, the remaining tensions in euro area sovereign debt markets and their impact on credit conditions, as well as the process of balance sheet adjustment in the financial and non-financial sectors, continue to dampen the underlying growth momentum.
This outlook is subject to downside risks. They notably relate to tensions in euro area debt markets and their potential spillover to the euro area real economy. Downside risks also relate to possible adverse developments in the global economy, higher than assumed increases in commodity prices, protectionist pressures and the potential for a disorderly correction of global imbalances.
Euro area annual HICP inflation was 2.7% in January 2012, according to Eurostat’s flash estimate, unchanged from December. The average inflation rate for 2011 was 2.7%, mainly driven by higher energy and other commodity prices. Looking ahead, inflation is likely to stay above 2% for several months to come, before declining to below 2%. This pattern reflects the expectation that, in an environment of weak growth in the euro area and globally, underlying price pressures in the euro area should remain limited.
Risks to the medium-term outlook for price developments remain broadly balanced. On the upside, they relate to higher than assumed increases in indirect taxes and administered prices, as well as increases in commodity prices. The main downside risks relate to the impact of weaker than expected growth in the euro area and globally.
The monetary analysis indicates that the underlying pace of monetary expansion remains subdued. The annual growth rate of M3 decreased to 1.6% in December 2011, after 2.0% in November, reflecting a further weakening of monetary dynamics towards the end of the year.
The annual growth rates of loans to non-financial corporations and loans to households, adjusted for loan sales and securitisation, also decreased further in December, and stood at 1.2% and 1.9% respectively. The volume of MFI loans to both sectors declined in December, and this was particularly pronounced in the case of the non-financial corporate sector. In addition, there are indications that bank lending conditions tightened further, affecting loan supply in several euro area countries in late 2011. It is not yet possible to draw firm conclusions from these developments, particularly given that the impact of the first three-year LTRO on bank funding is still unfolding and may not have been fully reflected in the most recent bank lending survey. In addition, other non-standard monetary policy measures announced in December are still to be implemented. Accordingly, close scrutiny of credit developments in the period ahead is essential.
The soundness of bank balance sheets will be a key factor in facilitating an appropriate provision of credit to the economy over time. It is essential that the implementation of banks’ recapitalisation plans does not result in developments that are detrimental to the financing of economic activity in the euro area.
To sum up, the economic analysis indicates that underlying price pressures should remain limited and risks to the medium-term outlook for price developments remain broadly balanced. A cross-check with the signals from the monetary analysis confirms this picture.
A combination of structural reforms and fiscal discipline is essential for boosting confidence and delivering a favourable environment for sustainable growth. Regarding fiscal policies, all euro area governments need to continue to do their utmost to ensure fiscal sustainability. It is essential that all countries adhere to the fiscal targets they announced for 2012. This should help to anchor expectations of sound fiscal policies and strengthen confidence. The rules guiding the design and implementation of national fiscal policies are being strengthened at the EU level as well as in the legal frameworks of several Member States. These are important steps in the right direction. With regard to structural reforms, these are key to increasing the adjustment capacity and competitiveness of euro area countries, thereby strengthening growth prospects and job creation. Notably, far-reaching and ambitious reforms should be implemented to foster competition in product markets, particularly in services sectors, while rigidities in labour markets should be reduced and wage flexibility should be enhanced.
We are now at your disposal for questions.* * *
Question: Could you clarify the position of the ECB with regard to the Greek bonds that you hold in various forms from the SMP and also investment, and would it be feasible for you to deliver them to the EFSF and get EFSF bonds in exchange?
Also, with the national central banks now setting criteria for the acceptance of credit claims, is there a risk of fragmentation of the financial markets in Europe, which is already apparent during the repatriation of a lot of the lending activities?
Draghi: On Greece, I am sorry but I cannot say anything about how holdings of Greek bonds, both under the SMP programme and under national central banks’ other holdings will be treated. What I can say, however, is that, a few minutes ago, I received a call from the Prime Minister of Greece saying that an agreement has been reached and endorsed by the major parties. This afternoon we will be having the Eurogroup meeting with the ministers and we will have a full report of the agreement, and also a discussion of the further steps.
On the second point, with the first three-year LTRO, we avoided a major credit crunch. I have already said that €230 billion worth of bank bonds were coming due in the first quarter. Furthermore, as I just read in the introductory statement, in the last two quarters of last year credit tightening started and then progressively accelerated, especially in some countries such as Italy and Spain. Once we had provided the first three-year LTRO, we also asked ourselves how we could make sure that this facility would reach not only the large banks, which usually have plenty of collateral and packaged in a way that corresponds to our eligibility criteria, but also the small and medium-sized banks that are most important for financing small and medium-sized enterprises (SMEs). Their collateral does not come in a way that naturally fits our criteria. This is why we extended the eligibility criteria for this collateral. The big question that I saw in at least one press article was: ‘but this is going to be very risky, isn’t it’? Sure, it is going to be more risky. Does it mean that we take more risk? Yes, it means that we take more risk. Does it mean this risk has not been managed? No, it has been managed, and it is going to be managed very well because there will be a strong over-collateralisation for these additional credit claims. The conditions will be very stringent. Each national central bank (NCB) will assess these credit claims on the basis of common guidelines, common rules, and the various NCB proposals will be evaluated by the Governing Council. So, we will be reviewing the situation in six months’ time. Incidentally, it will also increase the differentiation of the sort of collateral we have in this facility. So if we have taken more risk, we have also made sure that this is going to be very well managed, and the purpose, as I said, is to finance the real economy and especially SMEs, which account for almost 80% of employment.
Question: How exasperated or concerned are you by the fact that we have a problem with lending? I think a recent study from one of the major banks says that only 7% of lending is being passed on to the so-called real economy. You said it is a bit early to say whether all the measures have landed yet, but how concerned are you that we are indeed heading for a credit crunch at a critical time for the euro area economies?
And what is the latest stance of the ECB on potentially taking famous haircuts on bonds in the case of Greece – or possibly other countries, but we are talking about Greece at the moment?
Draghi: On the second question, I have no comment.
On the first question, we are indeed concerned by this slowdown in credit. I said that we have to wait and see, because partly it relates to the funding pressures that banks anticipated for the first quarter of this year and that we have removed with our three-year LTRO. The second part relates to the capital requirements expected following the EBA stress tests. And the third part of the reason relates to risk aversion. The data we just gave you from the bank lending survey do not fully reflect the impact of the LTRO, because the bank lending survey was carried out in the middle of that period. We have to look at two things now: we have to wait a little time to see whether things are changing for the better, and we also have to see what happens regarding the second LTRO. We must not forget that some banks use these proceeds (i.e. the borrowing from the LTRO) to refund their own bonds. In this sense, it was not new, fresh money available for lending. But, as I have said repeatedly, these operations address the liquidity risk, not the lack of capital. To some extent, they also address risk aversion – to the extent that the risk aversion results from a perceived lack of liquidity on the part of a counterparty.
Question: Given the downside risks to the economy, the financial markets expected another move downwards in the benchmark rate in the next few months. Do you think that they would understand the situation correctly?
And, second, after the three-year LTRO we did see a significant downward movement in the yields on Italian debt in particular. Certain bank CEOs said that they had even used the three-year LTRO to buy Italian government debt. Was it your intention that they do that?
Draghi: On the first question, we did not discuss any prospective or current change in interest rates.
On the second question, the use of these proceeds is a business decision and, as I have said repeatedly, our primary interest is in lending to the real economy. That is where we see most of the credit tightening in all categories, namely corporate, housing and consumption. The composition changes from country to country, but in some countries there is credit tightening for all categories. Incidentally, of the fall in rates in government bond yields, the most marked was not in Italy, it was in Spain. But that is not necessarily a negative thing in itself, because when banks set their pricing for their credits they look at what their other investment opportunities are, to the extent that they might invest in government bonds. They look at debt prices and, if the debt price goes down, one would expect that credit prices would also go down. We are looking with great intensity at current developments to see if what we do makes a difference from the point of view of credit to the real economy.
Question: In the introductory statement you no longer describe the downside risks to the economic outlook as substantial. Does that mean that you are confident that the recent improvement in financial markets is here to stay? Even if you did not discuss it, does that reduce the chances of further ECB easing measures?
Second, for the forthcoming three-year LTRO, how large do you expect demand to be for that? And are reports of demand for up to €1 trillion exaggerated in your view?
And, as a follow-up to a previous question, on the collateral you say you will manage the risk. Why will the Eurosystem not share the risk? Why does it have to stay with the national central banks?
Draghi: As regards your first question I would not say that we are confident. The fourth quarter of 2011 was very weak, but we have seen a stream of both survey and hard data that seem to point to a stabilisation in economic activity at a low level. In other words, when we presented the baseline scenario last time, the amount of evidence that this stabilisation was on track was smaller than the amount of evidence that we have today. As I have constantly said, uncertainty is high – uncertainty relating to the global economy, to sovereign tensions, to the credit markets and to global growth.
Regarding the level of the second LTRO the specialists in this field say that it should be substantial and possibly around the level of the previous one. I have no more information on this.
Concerning the collateral, on top of all the risk management measures and on top of all the strong over-collateralisation – which, once you apply these haircuts, reduces the amount of acceptable collateral by almost two-thirds – to assess the creditworthiness of a credit claim it is essential to know the economy where this credit claim originated. In other words, knowledge of the domestic economy is essential for understanding the creditworthiness of a bank credit claim. The assessment by the national central banks is very important, even though it is conducted on the basis of a common guideline. Therefore, we want to keep the risk related to these assessments with national central banks so they bear the full risk of their choices. In a sense, it is a further mitigating measure for the risk we are assuming. The Banca d’Italia, for example, would carry out the assessment and then it would present the assessment to the Governing Council on the basis of a common guideline and on the basis of common haircuts. So, with a credit claim of about 9, strong over-collateralisation would yield around four – or three, probably – as acceptable collateral. Of this three, the risks must be assessed according to the common guideline and presented to the Governing Council.
Question: Mr. Draghi, you warned two months ago about legal tricks that circumvent the spirit of the Treaty and that the ECB’s credibility depends on the spirit of the Treaty. All of this talk about what the ECB is going to do with its bond holdings centres around getting money to Greece. There is a hole of 50 billion euro or so, a hole in the funding, and the governments and the banks seem to want the ECB’s money. Is it still your position that the ECB needs to avoid legal tricks? And are these options legal tricks?
Draghi: Absolutely, you can rest assured that this is still my position. So, all the talk about the ECB sharing the losses is unfounded. But I cannot say what we can do about this until tonight, probably after the Eurogroup meeting. We will have to see. Let me add one thing, because perhaps I am not being completely clear. The idea that the ECB could actually give money to the programme would violate the prohibition of monetary financing.
Question: Your predecessor, Mr. Trichet, always used to say that the bonds that the ECB buys under the SMP programme will be held to maturity. Can you confirm that this is something you will still do?
And my second question: since the first LTRO was really successful, and it looks like the second one will be similar, is this a tool that you will keep in your tool box and may apply later on?
Draghi: On the second question, these are non-standard monetary policy measures. So they are of a temporary nature. Because of their size and complexity, one would certainly not want to pre-commit to making them a permanent feature of our monetary policy. Let me clarify, a well-functioning banking system does not need to go through the central bank for its financial intermediation. In a well-functioning banking system, both the interbank market and the senior unsecured bond market would be working. It is only because of the extraordinary conditions in these two markets, especially the first one, that we are taking these special measures. Indeed, the unsecured bond market has only now, after the first LTRO, shown some signs of reopening. So, we should always bear in mind that once the financing conditions in banking markets return to normal, our special operations will no longer be necessary.
Question: Will you hold the bonds in your SMP programme until maturity?
Draghi: We have no reason to change this commitment. If we do, we will tell you.
Question: You once said that the euro area fiscal accounts were stronger than those of the United States and Japan. Do you remember saying so? Can you explain why?
Draghi: I was clearly referring to the euro area as a whole. The overall euro area budget is in far better shape than the one in the United States or in Japan. Within the euro area, some countries are stronger than others. But if you take the euro area as a whole, we are in better shape. I do not have the exact figures to hand right now, but when you asked me before, I remember giving you the figures explaining why this is so.
Question: I have just a follow-up on collaterals: you told us that the national central banks will present their risk assessment to the Governing Council, but what exactly will happen if some members of the Council aren’t satisfied with what is presented?
And a second question, a personal one: you have already shown us that you are a good risk manager, but what about your stance as a central banker, and what is your personal conclusion after your first 100 days in office?
Draghi: On the first question, it would be like any other discussion in the Governing Council. We will look -- obviously together with the risk management officers and other very competent staff, -- at the assessments, we will have a discussion and if the Governing Council is not satisfied it will not be accepted. It’s like any other discussion.
Now, the second question was about my first 100 days. Well, it’s hard to respond but if you read a few newspapers that are also represented here you will get a full documentation of what they think.
Question: But what about your principles as a central banker then? You’ve shown us that you are a good risk manager, but it is hard to get any statement about you or your stance.
Draghi: Well, I think the proof is in the eye of the beholder. I have respected the mandate of the ECB, which is to maintain price stability in the medium term. Inflationary expectations have remained firmly anchored – both before I became president, in the years of my predecessor, and in the first 100 days. But admittedly, it is a very short time to judge someone, it could get much worse.
Question: I was a bit confused by your initial statement when you said: “Yes, we take on more risks, but we manage them well.” Could you perhaps just clarify on balance: is the Eurosystem more at risk or less at risk, or is it equal, as a result of your decision?
And secondly, could you give us a flavour, please, on how the discussion went on extension of the collateral framework and the changes in the quality standards? Was it unanimous, was there a wide agreement, were there lively discussions, as you called it last time when the interest rates were lowered?
And do you have an appraisal of how much the potential collateral will be extended, can be extended, as a result of your decisions that you took today for the banks to take advantage of? How much in sum, if you have an estimation?
Draghi: We, the Governing Council, thought that the amount of risk that was taken on board was perfectly acceptable and very well managed. We take risks with everything: we take risks with normal monetary policy operations, with LTROs, with the SMP. The important thing is that once we take these risks, firstly we don’t judge them to be excessive and secondly, and most importantly, we manage them well. We have full confidence in our staff that these risks can be well managed.
As regards your second point, the discussion was not unanimous, but it was not particularly contentious. There was wide agreement, although there was no unanimity.
On the amount: if I’m not mistaken (but here you have to take my figures with a grain of salt), we have from about 600 to 700 billion euro as the estimated amount of credit claims, of which only about 200-billion euro plus would become acceptable, because of the strong over-collateralisation that we asked for. So you can see how hard and stringent the selection of these claims is.
Question: A follow-up to Greece, as you discussed the issue of Greece during the Governing Council session: could you tell me if there is, in the discussion, a priority in the sequence? Once you have the PSI agreement and the measures to be proposed today that you will discuss in your Eurogroup – once these two priorities are on the table, I mean there are sufficient clear results, then the question of the ECB participating in the restructuring of Greece may be discussed, so you cannot rule this out as a matter of principle, but the priorities are very important in the sequence.
Draghi: I think the most important thing about Greece is this agreement, if it has been reached and endorsed by all parties. This is the major thing really. We always, for some mysterious reason, focus on the need to finance things, we always talk about firewalls, but I think the most important thing is the reforms that countries make and we should focus first on that, then on the rest. So, that is one thing, the second thing is the PSI. On that, as you know, we are not a negotiating party but the vibrations that we are getting is that the different parties are very close to an agreement. The third thing is the financing gap. There may be a gap, but I frankly don’t know how much that is and we will know more in the Eurogroup. The fourth issue is, ‘what about the ECB’? As you noticed, everybody has been talking about what the ECB could or could not do, what would be nice for the ECB to do and so on, but the ECB did not say anything. And so, the only thing that I can say today is still nothing other than what I said before, i.e. it is not our intention to violate the monetary financing prohibition.
Question: If the ECB were to transfer the bonds it has acquired under the SMP to a vehicle such as the European Financial Stability Facility, would that be monetary financing and therefore illegal?
Just to come back on the debate about extending collateral to include credit claims, can you give us a figure for the additional amount that banks would be able to borrow from the ECB as a result? I think the €200 billion figure you gave was the volume of credit claims. Is that the same amount as the banks would actually be able to borrow? Is it mostly Spanish and Italian banks that would benefit?
Draghi: On your second question: we do not know who is going to benefit most from these because it has more to do with the size of the bank and how the interbank market works within the countries. Ideally, small banks do not come to the ECB, but get their liquidity from the large banks that do. If you have an interbank market that functions, there is no need for these measures. In some countries, however, you do not have a functioning interbank market. Large banks come to the facilities, but instead of giving liquidity to the small and medium-sized banks they hoard it. So you have a further reason for credit tightening. The figure I gave you is not the amount that banks will be able to borrow because it has to be polished further before you can actually get the amount banks will borrow. I cannot be any clearer than that at the moment.
Question: I also had a question on the EFSF. If the ECB were to transfer the bonds it has acquired under the SMP to the EFSF, would that be monetary financing?
Draghi: The EFSF is like a government. Giving money to governments is monetary financing.
Question: And if the ECB sells the bonds?
It depends, if you make a loss on the sales that is monetary financing.
Question: I just wanted to ask you a broader question on your assessment that the euro area economy would gradually recover in 2012. And I wonder whether you think this differs markedly from the IMF recent world outlook assessment?
Draghi: Yes, it does differ. I would not say markedly, but it does differ in the sense that we are less pessimistic than the IMF. You might have heard what Jens Weidmann said recently about the IMF forecast for Germany. So we are certainly less pessimistic than the IMF.
Question: You were speaking of a mild recession before. Are you changing your view now in a more positive way, given the signs you have seen of a certain degree of stabilisation?
Do you consider the fiscal compact signed by the EU Member States as a durable “quantum leap”?
Draghi: I said before that we now have more survey and hard data confirming what I presented to you last time as our baseline scenario, namely a gradual stabilisation of economic activity at low levels. That is what I can say about the real economy. As we all know, uncertainty is high at the present time, and downside risks for growth still persist.
In my view, the fiscal compact is a major political event. It testifies to the willingness of the Member States to release sovereignty – partly, naturally – in the budgetary area and, in a sense, to accept this partial loss of sovereignty in their primary legislation, for example by means of constitutional changes. It is also a sign of the commitment by all the Member States, including the larger ones, to the euro. It is a sign that the euro is a strong reality. If one is bold, one would even say that it is the first timid step towards a fiscal union. A fiscal union should not start from being a fiscal transfer union where you have some countries that pay and other countries that spend. It should actually start from a compact that shows that all countries can stand on their own without a need to be continuously subsidised by others. If one is bold and interprets it in this way, it also shows a track of a fiscal union where each member is responsible and strong.
Question: Mr Trichet always emphasised that the ECB distinguishes between standard measures and non-standard measures. I haven’t heard that from you yet. Maybe you could say a few words, if that has changed?
And the second question is regarding the TARGET2 system. In Germany, an increasing number of economists are focusing on that, and the rating agency S&P said that the TARGET claims of the Deutsche Bundesbank could one day be a problem for Germany’s rating. Maybe you could also say a few words on that.
Draghi: No, there is no difference between the vocabulary used by Jean-Claude Trichet and by myself. There are standard measures and there are non-standard measures. The non-standard measures respond to exceptional circumstances that are temporary in nature. So there is no difference in the vocabulary.
With regard to the second question, TARGET2 imbalances are normal, are inherent in a monetary union. Usually, under normal circumstances, you do not observe high imbalances between countries, because in each country and across countries the interbank market would function. But when funding conditions become stressed in some parts of the euro area, the countries that are not stressed accumulate claims vis-à-vis the countries that are under stressed conditions. But this does not imply any more risk for the so-called ‘creditor countries’. It is part of the normal functioning of a monetary area with a central platform, which is the ECB.
Question: Mr President, you reacted very cautiously to the news from Athens. Maybe you can elaborate on that, or maybe that could also bring us to the question: “Do you have a plan B in case that doesn’t fly?”
You also dodged the question of the volume of Greek debt you are holding. Can you explain to us on what grounds you cannot elaborate on the volume the ECB is holding?
Draghi: No, we never have a plan B. To have a plan B means defeat already. I’m actually quite confident that all the pieces of this will fall into the proper places.
On your second question as I said before, I don’t want to comment on ECB holdings because I want to see what comes out of the Eurogroup tonight. It would be highly premature for me to say anything about that.
Question: My first question is: so far the LTRO seems to be working very well, like a magic stick, or something like that, and people may think that the ECB might prefer this further LTRO to a rate cut. What is your comment on that?
My second question is: this week, the Japanese Government announced that it has been intervening in the foreign exchange market for several days, from the end of October of last year, and without announcement. Your predecessor, Mr Trichet, said last August that such interventions need to be done on the basis of multilateral agreement and that that was not the case with the actions of Japan. The US Treasury has also made a similar critique. What do you think about that?
Draghi: In answer to the first question, there is no trade-off between the two measures. The LTRO addresses the quantitative shortages and liquidity constraints of certain parts of the euro area financial and banking system. The interest rate changes address pricing conditions, assuming that the euro area banking and financial conditions are working well, that the circumstances are normal. In that case you change the price of assets; you change the price of short-term rates, and so on. So they are two different things in the sense that they address different situations, different problems.
Regarding the Japanese interventions, I can confirm what my predecessor said on that occasion: the interventions, if they are needed, should be done in a multilateral framework – they should not be unilateral.
Question: First of all, in the event that the ECB does make some kind of arrangement for Greece, would you see that as being something done exclusively for Greece, or could it also be extended to other programme countries like Ireland, and would it be in the interests of a country like Ireland to try to get relief on its sovereign bonds holdings?
Second, you recently had a meeting with the Irish Finance Minister Michael Noonan about addressing the cost of the Anglo-Irish bank bonds. Can you tell us if you are optimistic that there will be a successful resolution to that, and if Ireland has the ECB’s support on that issue?
Draghi: We had a meeting with Minister Noonan and we reviewed the progress that the Government is actually making. In spite of the enormous challenges it is facing, the Irish Government ought to be praised for the constant progress that it is making in its reforms.
Regarding your first question, we have already mentioned that Greece is unique and we don’t want to repeat the experience. As I have not yet said what the ECB is going to do about Greece, it is a very difficult question to answer.
Question: Which national central banks are going to have programmes for having credit claims as collateral?
And the second question for clarification, you gave two figures, 600 and 200. I would like to understand if these relate to all banks in the Eurosystem or to all banks in the programme countries?
Draghi: These figures are for all banks in the Eurosystem. These are the first figures, which I have only just seen, about half an hour before the press conference. I’m not in a position to say which countries these figures relate to. They in any case relate to the whole euro area, so I’m not talking about large figures.
Question: You just said that if the ECB sold its bonds at a loss that would amount to monetary financing. So giving up gains, would that also be a loss?
Secondly, you are certainly aware that, despite all the success of the LTRO, that in this country some people at least argue that this is a sort of hidden government financing. What is your position on these critical remarks?
Draghi: As regards your second questions, the 3-year facilities are there to be used. There is no stigma whatsoever attached to these facilities. This has to be understood by everybody. I would describe some of the statements made as “statements of virility”. Namely, that it would be undignified for a serious bank to access these facilities. Now let me say that the very same banks that made these statements actually already access different kinds of facilities such as the euro dollar credit swap facility. Another bank, which according to a newspaper report made an indignant statement that there would be a stigma, actually accessed the LTRO. So, some of these “virility” or “manhood” statements are often incorrect. I think it’s a business decision. Some banks thought that it is far better for banks to fully access these facilities, unlike those that made these statements. So they saw no stigma. It’s a business decision that should be presented as such. I should add that the crisis, which the banking system and the funding system is currently facing, originates from a sovereign crisis. So the banks that happen to be located in countries that do not have any fiscal crisis, that have always undertaken the appropriate reforms, should give more credit to their governments for having been virtuous all along.
On your first question, consider the EFSF as euro area governments -- if the ECB gives money to governments that is monetary financing. If the ECB redistributes parts of its profit to euro area member countries (via the euro area national banks) according to its capital key, that is not monetary financing.
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