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31 October 2011

Reuters: Draghi over-interpreted on bond buys, says Trichet


Outgoing ECB President, Jean-Claude Trichet, said that markets have over-interpreted comments by incoming European Central Bank chief, Mario Draghi, on the bank's readiness to go on buying the bonds of troubled eurozone states.

In a wide-ranging interview at the end of his eight-year term, Trichet welcomed what he saw as a commitment by eurozone governments at a summit last week to intervene in bond markets via the EFSF rescue fund to fight the bloc's debt crisis. Draghi seemed to signal that the ECB stood ready to go on buying bonds, intervening in debt markets to lower the borrowing costs of countries snared by the crisis. Trichet said too much had been read into Draghi's comments. "I don't think that Mr Draghi said that", he said of the message understood by financial markets that the ECB would go on buying bonds."I think there has been an over-interpretation", he added.

The confusion over Draghi's message highlights the importance of communicating ECB policy -- an area where Trichet has largely succeeded, delivering a clean, consistent message that has endeared him to financial markets. Trichet believed governments had shown at last week's summit that they, rather than the ECB, were ready to lead the policy response to the eurozone's debt crisis. "We cannot substitute for governments, we will not substitute for governments", he said.

Asked whether a beginning to the end of the crisis was approaching, he said: "It is a global crisis and I would say that it is an ongoing process of structural adjustment at a global level. It calls for permanent attention, for credible alertness."

Full article



© Reuters


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