ECB’s Stournaras: TPI ‘Cannot Be Used in All Cases’, May Never Be Used

7 November 2024

By Marta Vilar – ATHENS (Econostream) – European Central Bank Governing Council member Yannis Stournaras said on Thursday that the Transmission Protection Instrument ‘cannot be used in all cases’ and, in fact, might never be used.

In a panel discussion along with ECB Chief Economist Philip Lane and former Banco de España Governor Pablo Hernández de Cos at a conference hosted by the Bank of Greece, Stournaras, who heads the Greek central bank, likened the TPI to Mario Draghi’s famous no-limits vow.

‘TPI is an instrument which, if needed, would be used when there are market pressures not guaranteed by underlining fiscal conditions of countries’, he said, ‘It’s like Draghi’s “whatever it takes” phrase’.

The Transmission Protection Instrument was never used and ‘we might never use it’, he added.

‘But it cannot be used in all cases’, he observed, as its deployment on behalf of any member state required that the state be in compliance with current EU fiscal rules.

‘Stable public debt, in my view, is necessary for financial stability’, he said.

The impact of sovereign bond spreads on interest rates in the banking and the corporate sector complicate the ECB’s job in terms of monetary policy transmission, according to Stournaras.

‘We want to have public debt sustainability that facilitates the transmission of monetary policy […] but also, we want price stability to facilitate consolidation’, he said.

Stournaras called once again for a ‘common fiscal capacity’ to become a ‘permanent fixture’ of Europe.

[W]e need a fiscal capacity for things that will appear in the future’, he said.

‘We are less flexible than the Fed, but we are more independent, he said, rejecting the idea of fiscal dominance. ‘There’s no single finance minister in Europe to press the ECB.’