BLED, Slovenia (AFP) ― OECD chief Angel Gurria on Sunday urged the European Central Bank to give a credible signal to markets and resume bond-buying to help debt-wracked Italy and Spain as soon as possible.
“I think that the ECB is the bazooka, the firepower, the muscle, the one that has the capacity to impress upon the markets and say: yes we will,” Gurria told journalists on the sidelines of a conference in Slovenia’s lakeside resort of Bled.
Asked whether the ECB should buy Italian and Spanish bonds, Gurria, the head of the Organization for Economic Cooperation and Development, said: “Yes, they should, if you ask when, the answer is the sooner the better.”
“It has to be a credible signal ... to say: we have members of the family that are doing the right thing, we will not let you push them around,” he also said, adding that Italy and Spain remained under market pressure despite taking measures to bring their finances into order.
“If you have the ECB which can work in the markets in order to bring down the maturities, then why not.”
Last month, ECB president Mario Draghi said the central bank “may” resume bond purchases under strict conditions.
But Germany opposes a bond-buying program, saying it could have negative repercussions for the credibility and confidence of both the bank and the currency.
The ECB’s policy meeting this week was expected to see a face-off between Draghi and the head of Germany’s Bundesbank, Jens Weidmann.
Ahead of the meeting, Gurria warned eurozone members: “You should not put (the euro) at risk, if you have an institution like the ECB, use it to the greatest possible extent.
“We have passed the question of moral hazard, these (Italy and Spain) are performing countries, now it is the system that is at stake,” he said.
The OECD chief also said he did not expect Germany’s Constitutional Court to block Europe’s fiscal pact for greater budgetary discipline or its 500-billion-euro ($629-billion) permanent bailout fund to aid debt-mired eurozone countries.
Germany’s top court is expected to rule on Sept. 12 on legal challenges to the implementation of the new tools for fighting the eurozone debt crisis, which cannot come into force without the ratification of the continent’s top economic power.
“I hope and expect that the Constitutional Court will find it appropriate that there is a fiscal pact, and there is a sense of solidarity,” Gurria said.
“Larger countries have to ... chip in (to) those mechanisms,” he added, noting that Germany had benefited from the common currency in the past.
