ECB’s Christian Noyer says no decision made on quantitative easing

The European Central Bank should cap the size of any government bond purchase plan it embarks on so as not to crowd out private sector investors, said ECB Governing Council member Christian Noyer.

The ECB Governing Council gathers on January 22 for its next policy meeting and could then decide to start printing money to buy large amounts of government bonds, a step also known as quantitative easing, to prevent deflation from taking hold.

Mr Noyer told German business daily Handelsblatt that nothing had been decided and that the debate was “not only about whether we should do it at all but also about when we should do it”.

“There are a variety of views such as we should have done it months ago, we should do it maybe later but not now or that we should do it exactly now,” Mr Noyer said in an interview to be published in today’s edition.

“My personal reading is that if we were to decide to have a government bond buying programme, we should have a cap in terms of the percentage of what we would be buying, so that most of the financing will continue to rely on the private market,” he said.

Such a cap should limit any ECB purchases to a certain share of each country’s outstanding debt, he said.

“In my view, such a programme can be launched only if a majority of the debt would continue to be held by private investors,” he said.

The question of whether such a programme should include Greek debt was small compared to the issues of timing and necessity.

On Greece’s public finances, Mr Noyer said any debt restructuring “is really something that you want to only use as a last resort ... In the present circumstances one may consider whether the repayment schedule is appropriate, but this is really a matter for negotiations between the lenders and the borrowers.”

Reuters