ECB may not need to buy bonds, says council member
Central bank member reveals the advantage of threatening unlimited firepower
European Central Bank governing council member Panicos Demetriades said the bank might not have to spend a cent on government bonds.
The threat of unlimited buying under the ECB's new bond purchase programme might mean that "in the end, action is not needed", said Demetriades, who heads the Central Bank of Cyprus.
"No one will speculate against the unlimited firepower of a central bank," he said. "This is what stabilises currencies of countries where investors know that. One wouldn't gamble against the Federal Reserve, for example."
Spanish and Italian bond yields have plunged since ECB president Mario Draghi pledged on July 26 to do what is needed to preserve the euro.
Under Draghi's scheme unveiled on September 6, the ECB would spend as much as needed to contain borrowing costs in euro-zone countries if they sign up to bailout conditions first.
"A central bank has this wonderful ability that no other player in the market has when it says, 'I'm going to do whatever it takes', and everyone believes that," Demetriades said. "In the end, they may do nothing."