Lautenschlaeger Warns ECB Can’t Help Irresponsible Countries

(Bloomberg) -- The European Central Bank isn’t allowed to finance governments and mustn’t provide liquidity to insolvent banks, Executive Board member Sabine Lautenschlaeger said in comments likely aimed at Italy.

“While the ECB can contribute to the stability of the financial system, it cannot by itself ensure financial stability,” Lautenschlaeger, who is also vice chair of the ECB’s bank-supervision unit, said in the text of a speech in Malta on Friday. “It’s therefore important that all relevant actors are fully aware of their respective responsibilities for financial stability and act in a manner to live up to those responsibilities.”

The Italian parliament voted this week in favor of the populist administration’s fiscal plans that include a higher deficit, unsettling markets and drawing criticism from the European Union. A surge in Italian bond yields has raised concern that the country could tip into a financial crisis that spills over to other members of the currency bloc.

Read more:

The yield spread between Italian and German 10-year bonds climbed to five-year high on Thursday, before stabilizing on Friday.

Lautenschlaeger expressed confidence that the euro area’s economic upswing will continue despite uncertainties related to a disorderly Brexit and trade.

“There are some increasing downside risks we have to look at,” she said, but “there’s resilience in the growth path.”

©2018 Bloomberg L.P.