It took a long time to get there, but finally the European Central Bank (ECB) said it would buy unlimited quantities of bonds from countries in need of aid to drive down interest rates and keep markets from panicking. But now that the ECB has declared a willingness to act, neither Spain nor Italy, the next two countries in line, have come forward to ask for assistance. According to Prime Minister Mario Monti of Italy, that is because they fear additional conditions tacked onto the aid by the ECB—and he also says that the International Monetary Fund (IMF) should not be involved in the process.
Bloomberg reported late Thursday that Monti said conditions should be limited to those already imposed on the countries working to control their finances. The European Union (EU) spelled out those conditions in June, and Spain and Italy both have been working to bring their finances in line with those requirements.
Monti said countries are reluctant to ask for assistance because they don’t know what else they might be asked to do, beyond the already challenging requirements the EU set forth months ago. He also said in the report that oversight should be restricted to “checks so the countries continue to behave in that positive way. If this is the conditionality that will be finally delivered, should a country be in a market situation suggesting its use, there would be nothing dishonorable.”
He also said “it’s not necessary” for the IMF to be part of the process, and that the EU and ECB should quickly spell out any conditions to be part of a bond purchase request. “I believe that should be really kept to a minimum, because there is no reason to delay something that was already rather well defined in June by the European Council,” he was quoted saying.
Just Thursday AdvisorOne reported that internal dissent in the troika of the EU, the ECB and the IMF was stalling Greece’s next tranche of funds, as the IMF was insisting on debt writedowns while the EU and ECB were willing to give Greece more time.