Mario Draghi says ECB could buy government bonds; Japanese recession weighs on markets – live (2024)

And that’s all for today.

Our summary of Mario Draghi’s testimony to MEPs is here.

And the lunchtime summary covers Japan’s recession, the Bundesbank’s gloomy growth forecasts, and Mark Carney’s call for tougher restrictions on bankers pay.

Back tomorrow.... Thanks all, and goodnight. GW

Draghi’s testimony even pushed shares a little higher in London, where the FTSE 100 just closed 17 points higher at 6671 points, a gain of 0.25%.

Jasper Lawler of CMC Markets says the ECB chief’s talk of possibly buying government bonds – and a takeover offer for botox-maker Allergan – took traders’ minds off the Japanese recession.

Markets in Europe traded between gains and losses for most of the session on Monday as investors weighed up slightly better growth at home, renewed M&A activity in the pharmaceutical sector against sharp growth contraction in Japan.

It was only after a speech from Mario Draghi that markets found their footing thanks to the prospects of sovereign bond purchases from the ECB.

The euro fell, and European stock markets rose, after Mario Draghi declared that:

“Other unconventional measures might entail the purchase of a variety of assets, one of which is government bonds.” .

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The French CAC and the German DAX are both up around 0.7%, reversing the losses triggered by Japan’s return to recession.

The euro, though, has shed 0.6 of a cent against the US dollar, to $1.246.

Draghi is now taking further questions, in his role as chairman of the European Systemic Risk Board.

He’s told MEPs that future bank stress tests should include the risk of fines for misconduct.

It’s being streamed here.

OK, that’s the end of Mario Draghi’s testimony to the European Parliament in his role as president of the European Central Bank.

A reminder of the key points from the last couple of hours.

1) Draghi has urged European leaders and policymakers to deliver “concrete” short-term commitment for structural reforms in the member state, and to take steps towards long-term sharing of sovereignty to reinforce euro.

He said:

2015 needs to be the year when all actors in the euro area, governments and European institutions alike, will deploy a consistent common strategy to bring our economies back on track.

2) The ECB chief denied that Greece will require debt restructuring, insisting that its borrowing is sustainable if Athens sticks to its targets.

3) Draghi gave a clear signal that the ECB could begin buying eurozone government debt if its existing stimulus measures don’t bring inflation back to target.

The governing council is unanimous in its commitment to unconventional measures, he insisted, which:

“could include changes to the size and composition to the Eurosystem balance sheet, if warranted, to achieve price stability over the medium term.”

He then added:

“Other unconventional measures might entail the purchase of a variety of assets, one of which is government bonds,”.

4) Draghi defended the euro, saying it is “irreversible”. He denied that the single currency caused the structural problems and weak growth in the eurozone.

5) But he remains concerned about the state of the eurozone economy, saying current growth rates are dismal, and unemployment still too high.

6) And Draghi refused to accept that the ECB forced Ireland into applying for a bailout in 2010.....and also ruled out being a ‘formal’ part of Ireland’s bailout.

Draghi bursts into Italian, to answer a question about banking supervision. Then he apologises for yielding to his natural instincts.

Ever the pro, Draghi then translates his answer into English, (for the benefit of any ignorant Brits tuning in).

Eurozone banks have been tested robustly, and most passed our tests. But if problems arise in future, then the supervisory board will pick it up and deal with it, he says.

Draghi repeats that the ECB is committed to doing everything within its mandate, and wants people to understand that it is ready to act if more unconventional measures are needed.

Another Irish MEP asks whether Draghi will take part in Ireland’s inquiry into its bailout, will he make a senior official responsible to liaise with the inquiry, and will it release any necessary documents to help the inquiry?

Surely you agree, Mr Draghi, that the ECB should be accountable to the public. An Irish inquiry without the ECB would be like Hamlet without the prince.

Draghi agrees that the ECB must be accountable to the people, and indeed it already is, through this committee. So it won’t take a formal role in the inquiry – we might participate informally, but we haven’t decided yet.

And it won’t appoint a ‘point-person’ to help the inquiry.

Not terribly helpful, frankly.

The euro area must grow more, Draghi insists.

Europe’s current economic performance is “dismal”, and the jobless levels - particularly for young people- is unacceptably high.

But he denies that the euro is the cause of this malaise -- look, most of the countries in the eurozone grew in the last quarter. Only two saw their economies shrink.

The eurozone must also “move from rules to institutions”, Draghi concludes, but he won’t say any more because it’s not in his remit.

Governments must deliver structural reforms even if they mean changing the way that countries have run for a long time, Draghi says.

And he claims that many eurozone members had lost monetary sovereignty long before the creation of the euro. Now they share sovereignty.

Will the ECB’s new asset-backed securities programme turn it into a bad bank?

NO, Draghi insists. He explains that the default rates between US ABS products (which often comprises sub-prime loans) is much, much higher than the ABS products which the ECB will buy.

And we will only buy the senior tranches of some ABS products -- to call the ECB a bad bank is not right, to say the least.

Furthermore, we will only buy mezzanine levels (the ‘riskier’ stuff), if there is a government guarantee.