Mario Draghi, the president of the European Central Bank, has said that the ECB is ready to start buying government bonds but that any progress remains “in the hands of governments”.
Draghi, speaking after a meeting of the ECB's governing council in Kranj, Slovenia, said that the mere announcement of the plan to buy bonds in unlimited amounts at the start of last month had relieved financial market pressure.
Financial analysts believe Spain will be forced to request help from the ECB soon, with the government struggling to get the economy under control and meet tough deficit-reduction targets.
Earlier in the afternoon Draghi announced that the governing council had decided to keep the eurozone's main interest rate on hold at a historic low of 0.75%.
Draghi said that there had been no discussion between the governing council about cutting rates further.
Spain has not yet applied for help from the ECB – or from the European Stability Mechanism (ESM), the eurozone's rescue fund – with Mariano Rajoy, Spain's prime minister wary, of the conditions that might be set by the rest of the eurozone.
However, Draghi said that conditions did not necessarily have to be harsh.
“Conditions don't need to be necessarily punitive,” he said. “Many of the conditions have to do with structural reforms, which have a social cost, but also great social benefits.”
Draghi said that Spain had made “significant progress” in reforming its economy. But he added: “Significant challenges remain as well.”
He said that everything necessary was “in place” to start buying bonds but that the decision had to be made by governments.
“The ECB is there to make an environment that is conducive to reforms, but the decision is with governments,” he said.
Click here to read Ian's blog on today's ECB meeting.