The European Central Bank's bond-buying program has relieved some of the pressure on struggling eurozone countries like Spain. But the bank's chief has warned that the help is not a blank check.
The head of the European Central Bank on Wednesday said he is confident the government of market-battered Spain would do what it takes to get its finances back in order, while also warning that the bank's efforts to help struggling eurozone countries would not last forever.
"We have no reason to doubt about the absolute commitment of the Spanish government to undertake the necessary reforms," Draghi told the European Parliament's economic and monetary affairs committee in a visit to Brussels on Wednesday.
A recent bond auction in Spain revealed that investors are increasingly worried about the country's struggling economy, which is projected to contract this year by 1.7 percent. Interest rates on 10-year Spanish bonds - a key indicator of investor confidence - hit an alarming 5.97 percent on Monday.
Bond-buying won't last forever
Draghi also warned that the ECB's bond-buying program, which has relieved some of the pressure on countries hard-hit by the eurozone debt crisis, would be "neither eternal nor infinite."
The bank has spent 214 billion euros ($283 billion) since May 2010 buying up bonds from eurozone governments, but has not done so at all in the past six weeks. The high interest on Spanish bonds this week was a sign that despite the ECB's help, Spain has still failed to convince investors it can avoid a bailout like Greece, Ireland and Portugal.
"We have to, in a sense, walk this thin but delicate balance where we want to preserve the credibility of the ECB, because it's one of the few things left now," he said. "To do so means we have to act within the limits of our treaty. It wouldn't do any good to the union... if we were to step out of the limits established by our treaty and our mandate."
The treaty that established the ECB states its main purpose is to control inflation, while "monetary financing" is explicitly forbidden.
acb/ (AP, dpa)