Draghi: OMT programme not a replacement for market access

The Outright Monetary Transactions (OMT) programme announced by the ECB last month will never be a replacement for primary market access, says the bank’s president Mario Draghi.

However, the bank is on standby to unleash the OMT programme “once all the prerequisites are in place.”

This month’s ECB meeting was in Slovenia. It was certainly never going to be as eventful as last month’s meeting when Mr Draghi unveiled the details of the OMT. According to the programme, the ECB will buy up unlimited amounts of short-term bonds of eurozone member states that are experiencing funding difficulties. Crucially, the recipient will have to agree to conditions imposed by EU and IMF.

Mr Draghi refused to be drawn on whether Spain should apply for assistance and what circumstances would trigger an OMT. But significant progress had been made in Spain in terms of structural reforms and improving competitiveness, he noted. He said it was ultimately a political decision for each member state.

There was no question about Ireland during the hour-long press conference. But Portugal would not be eligible for OMTs because it was in a bailout programme and it was only open to countries that had full market access, he said.

He did note that Portugal last week issued a five-year bond, which was one step closer to full market access.

Mr Draghi avoided answering a question about the communique issued by the finance ministers of Germany, Finland and Holland, which appeared to rule out the ESM dealing with legacy bank debt. He said it was up to European leaders to agree on the measures proposed in the Jun 29 EU Summit.

Ernst & Young’s economic advisor Marie Diron said: “We agree with President Draghi that the onus is now on governments to deliver their end of the bargain — by continuing to push ahead with fiscal and reform efforts where necessary.”