European stocks went down on Thursday after the European Central Bank (ECB) chairman, Mario Draghi, has failed to calm investors waiting new measures against sovereign debt crisis, according to Bloomberg. ECB will prepare a program of purchases of bonds through open market operations, “large enough to achieve its objectives,” said today the ECB chairman, Mario Draghi. Current yields paid by some states are unacceptable, Mario Draghi said in a press conference at the end of a monetary policy meeting. ECB chief reiterated that the euro is “irreversible”.
The new bond acquisition program is different from previous one, he said. Governments must fulfill their commitments on fiscal reforms in order to benefit the program. The mechanism will focus on the acquisition of financial instruments with shorter maturity. “It is a different attempt from the previous one (bond purchase program). It clearly fits in our mandate, among the instruments of monetary policy,” Draghi said, quoted by the Guardian.
ECB president expects debt market tensions to affect the growth of the euro area. Unemployment will also impact on growth which also hit by the worldwide slowdown. “In some countries there have been very high risk premiums for some governments in the euro area. This situation limits the monetary policy,” he said. ECB will also take measures on the concerns about private investors over the payment priority for the bonds held by the ECB, according to Draghi.
Handing over a banking license to the European Stability Mechanism, a proposal supported by France and Italy, is contrary to EU law, the ECB president said. Banking license would entitle the Fund to access liquidity from the ECB. ECB kept Thursday the monetary policy interest rate at 0.75%, a decision anticipated by most economists.
Stock exchanges tumbled
BNP Paribas, France’s biggest bank, lost 2.7%, reversing the advance of the first part of the session. Veolia Environnement was down 12%, after reports that the difficult economic situation in France and Italy influenced the results in the first half of the year. Deutsche Post shares rose 2.2% after results above expectations. Stoxx Europe 600 index lost 1% by 2 PM (London time). The indicator rose by 3.7% starting on July 26, when Draghi said the ECB will do whatever is necessary to protect the euro. National stock exchange indexes declined on 17 of the 18 capital markets in Western Europe. UK FTSE 100 index lost 0.8%, the French CAC 40 fell by 1.6% and German DAX by 1.6%.
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