ECB Update2- Draghi says rescue fund cannot be bank
(08-02 21:07)
Giving Europe's permanent European Stability Mechanism rescue fund a banking license and thereby allowing it to tap the European Central Bank for funding is against European law, ECB President Mario Draghi said today in Frankfurt.
“We have a legal opinion saying that it [ESM] is not a suitable counterparty,'' Draghi said after the ECB left interest rates at 0.75 percent and said the bank would draw up a new bond buying mechanism, Reuters reports.
Italy and France have been pushing to give the ESM a banking license to raise the fund's firepower so it would be able to intervene more authoritatively in bond markets if needed, but an ECB legal opinion from March last year ruled out such a step.
Nonetheless, Austrian policymaker Ewald Nowotny broke ranks with colleagues last week by saying such a move had merits.
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