ECB Has Several Monetary Tools If Situation Demands, Says Mersch

(RTTNews) - The European Central Bank has several monetary tools at its disposal to apply if the situation demands, but cautioned that government bond purchases would pose immense challenges, Executive Board member Yves Mersch said Monday.

At a conference in Frankfurt, Mersch said, "Should the need for further monetary measures arise, the necessary tools are available."

"In the euro currency area there is no central sovereign whose debt the ECB could purchase," he said.

To define portfolios of government bonds of Eurozone member states and to buy them would pose immense economic, legal and political challenges for the ECB, Mersch warned.

A negative deposit rate will prompt banks to divert excess funds to real economy. However, he noted that it might make loans expensive, if banks pass those costs to their customers.

Providing long-term loans called LTRO will ease liquidity problems, but it could be used to buy government bonds. That in turn represents far-reaching market interventions, Mersch added.