The European Central Bank's new government bond purchase program may last only for a few years, ECB Governing Council member Christian Noyer told Frankfurter Allgemeine Zeitung in an interview published Thursday.
Noyer, who heads the Bank of France, said he hoped that the impact of the program would be felt very quickly. "I would be surprised if such a program" is in place for several years, he told the magazine.
The bond purchase program, the Outright Monetary Transactions (OMTs), "is a weapon of deterrence." It can be put to test, and "we will not hesitate to use it to demonstrate our resolve." he said.
The central bank will also not hesitate to terminate the program if the countries does not follow the European Stability Mechanism (ESM) guidelines strictly, he added.
Commenting on the European Commission's proposal on banking supervision, Noyer said all the 6,000 banks in euro area must be bought under the single supervisory mechanism. It is better to abandon the project completely, if it includes only the 20 largest banks.
Responding to a query on Germany's concern over the conflict of interest between monetary policy and banking supervision, he said the two concepts are separated by "Chinese walls." Fourteen out of the 17 central banks have the responsibility for banking supervision.
On activating the OMTs, he said it is upto the International Monetary Fund and the elected governments to decide if a country has fulfilled the necessary conditions.
by RTT Staff Writer
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