This Thursday European Central Bank announced a new successor to its Securities Market Programme (SMP), which will be called Outright Monetary Transaction (OMT), an unlimited and sterilised bond purchases programme. The programme will be placed in secondary markets so to avoid EU Treaty breach which forbids direct purchases of government debt.
The decision was “unanimous with one dissenting view” – a face-saving unanimity within governing board of ECB. Mario Draghi is happy, but this is not as important as one technical feature which engages ECB into new waters and might rise some questions on its independence. It is about a “conditionality”, which in fact will be placed in appropriate national programmes of countries which will be asking for EU/IMF rescue funds.
A relieving may be a fact that ECB is taking part in Troika missions to programme countries and is sitting next to the European Commission and IMF, however, ECB in this case is not alone and, indeed, is a part of negotiations with national governments on measures to take or on measures which have been taken and have to be accepted. Thus the OMT programme and its decisions will depend on policy makers in the member states, other institutional actors and may have an impact on declared objectives of ECB to ensure price stability, single monetary market or open channels of monetary transaction. Almost that.
On the other hand it seems that a declaration made by Mario Draghi in London weeks ago on preserving the euro ‘whatever it takes’ now is getting its shape and little by little engages the ECB into euro governance debate and is setting new ambitions for deeper integration of European Monetary Union. It demands sacrifices to shared objectives and ECB has made its step, recognising its role and responsibility arguably within a mandate as set out by the EU Treaty.
There is still a breathing place left for the ECB as a new-born programme has no cap on yields or is unlimited in its character (until its objectives will be reached or until programme countries behave). It seems this time the ECB evaded the corner but the next round may bring new surprises among others in banking sector or corporate debt.