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ECB's capital base to double
Source: Agencies |
December 17, 2010, Friday
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Print Edition
Print Edition
THE European Central Bank yesterday said it will almost double its capital base to 10.76 billion euros (US$14.3 billion) - money that will buttress its efforts to contain the continent's government debt crisis.
The central bank, the monetary authority for the 16-nation eurozone, said that its 5-billion-euro increase from eurozone national central banks would take effect on December 29.
The ECB has been playing a key role in Europe's efforts to ease debt market turmoil by buying government bonds.
By buying the bonds, the ECB has helped calm market turmoil that was threatening to spread from bailed-out Ireland and Greece to other financially weak countries such as Spain and Portugal. The purchases have driven down interest yields that threatened to go so high weak governments could no longer borrow.
An ECB statement didn't specifically mention the bond-buying program.
It said the increase "was deemed appropriate in view of increased volatility in foreign exchange rates, interest rates and gold prices as well as credit risk." The funds will come from eurozone national central banks.
From a longer-term point of view, the increase "is also motivated by the need to provide an adequate capital base in a financial system that has grown considerably," the ECB said in a statement.
Earlier this week, an official from Germany - which has the eurozone's biggest economy - said his country would be willing to boost the ECB's capital base.
The move came as the continent's leaders headed into a summit amid differences on how to fight Europe's debt crisis.
The two-day EU meeting in Brussels wasn't expected to result in any new shock-and-awe decisions to contain the smoldering debt crisis.
Instead it will focus on a small change to EU treaties to set up a new crisis mechanism agreed almost two months ago.
German Chancellor Angela Merkel insisted that in itself was a milestone.
The central bank, the monetary authority for the 16-nation eurozone, said that its 5-billion-euro increase from eurozone national central banks would take effect on December 29.
The ECB has been playing a key role in Europe's efforts to ease debt market turmoil by buying government bonds.
By buying the bonds, the ECB has helped calm market turmoil that was threatening to spread from bailed-out Ireland and Greece to other financially weak countries such as Spain and Portugal. The purchases have driven down interest yields that threatened to go so high weak governments could no longer borrow.
An ECB statement didn't specifically mention the bond-buying program.
It said the increase "was deemed appropriate in view of increased volatility in foreign exchange rates, interest rates and gold prices as well as credit risk." The funds will come from eurozone national central banks.
From a longer-term point of view, the increase "is also motivated by the need to provide an adequate capital base in a financial system that has grown considerably," the ECB said in a statement.
Earlier this week, an official from Germany - which has the eurozone's biggest economy - said his country would be willing to boost the ECB's capital base.
The move came as the continent's leaders headed into a summit amid differences on how to fight Europe's debt crisis.
The two-day EU meeting in Brussels wasn't expected to result in any new shock-and-awe decisions to contain the smoldering debt crisis.
Instead it will focus on a small change to EU treaties to set up a new crisis mechanism agreed almost two months ago.
German Chancellor Angela Merkel insisted that in itself was a milestone.
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