ROME (MNI) — The European Central Bank’s decision to purchase
government bonds was taken under “exceptional circumstances” and the
purchasing program must come to an end as soon as market conditions
permit, ECB Governing Council member Mario Draghi said Monday.

Addressing shareholders of the Bank of Italy, which he heads,
Draghi said that in taking its controversial and unprecedented decision
to buy eurozone government securities, the ECB “considered that the
functioning of the monetary policy transmission mechanism was endangered
and the stability of the euro’s financial system [was] at risk.”

He repeated recent comments of his Governing Council colleagues,
noting that the ECB is sterilizing the bond purchases, “which do not
finance public deficits.” The ECB’s “independence is not in question,”
he added.

Draghi said the bond purchase program “will have to be discontinued
as quickly as possible, as soon as the markets spontaneously resume
trading of the securities of the countries involved.” He thus echoed the
remarks of ECB President Jean-Claude Trichet, who said earlier today
that the securities purchase program was “time bound.”

In order for trading in the questionable securities to resume,
there will need to be “rapid, significant and discernable progress in
adjusting government budgets,” Draghi said. The E750 billion financing
mechanism for EMU states in need, set up by the EU and IMF, must also be
“fully operational,” he said.

Draghi also asserted that the recent attack on the euro in foreign
exchange markets “is not directed against the area as a whole.” Rather,
it is “exploiting the opportunity offered by the unfinished state of the
project, [and] it isolates the weakest members,” said.

He asserted that the Eurozone as a whole is “sounder than other
currency areas,” with current accounts and even public budgets that are,
in the aggregate, “more balanced.”

Still, the attack on the euro has shown that the currency “lives
with all its members, large and small, strong and weak,” Draghi said.

“If in the past it was an illusion to think that the currency alone
could ‘make’ Europe, today the only course of action is to reinforce the
construction of Europe: in the political sphere, with a more active
government of the Union; in budgetary discipline and in progress on
structural reform, with a new stability and growth pact that is at once
broader and more binding,” he said.

Indeed, “a strengthening of the Stability and Growth Pact is
urgent,” Draghi said. “The commitment to achieve a structural budgetary
position in balance or in surplus must be made cogent by introducing
sanctions, including political sanctions, for non-compliance,” he added.
And, he said, “the accuracy of statistical information, particularly
public finance statistics, must be ensured.”

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