ECB chief Draghi defends bond purchasing program in German parliament

European Central Bank (ECB) President Mario Draghi visited Berlin on Wednesday, defending his unlimited bond purchasing program in German Bundestag, or lower house of the parliament. The ECB's Outright Monetary Transactions (OMT) plan, which was announced last month to purchase unlimited amount of bonds issued by eurozone struggling economies, would neither "compromise ECB's independence" nor create "excessive risks" for taxpayers or lead to inflation, said Draghi. "The fact that governments have to comply with conditionality will actually protect our independence. The ECB will not be forced to step in for a lack of policy implementation," he explained, adding that ECB would decide whether to intervene "based on its own assessment of monetary policy transmission and with the aim of safeguarding price stability." According to the design of OMT, member states who wish their bonds to be purchased by ECB, would have to apply for aid from European rescue funds, and accept strict conditions attached. "Our interventions will take place solely on secondary markets ... They will involve buying government debt from investors, not from governments. All this is fully consistent with the treaty's prohibition on monetary financing," Draghi said. He argued that any "excessive risk" to taxpayers would only materialize if a country were to run "unsound policies". But this will be explicitly prevented by the ESM program. "We have been very clear that each time a program starts being reviewed, we will routinely suspend operations and resume them only if the review has been concluded positively. This will ensure that the ECB intervenes only in countries where the economy and public finances are on a sustainable path," Draghi said. He also defended his anti-crisis measure against accusation that it might lead to inflation. "We have designed our operations so that their effect on monetary conditions will be neutral," he said, "for every euro we inject, we will withdraw a euro." Being considered by the market as two of the stabilizing anchors for the crisis-tortured eurozone together with the ESM, the ECB's bond purchasing plan had faced resistance from Germany, the largest economy in Europe and by far the largest paymaster for bailout funds. German lawmakers and German central bank, the Bundesbank, have argued that the ECB has exceeded its authority and its plan would trigger inflation in the eurozone. The Bundesbank on Monday reiterated its opposition against the plan by accusing ECB of mixing up monetary policy and fiscal policy. "Monetary policy (in ECB's plan) takes on a stabilizing function, which is originally a fiscal policy task," the Bundesbank wrote in a monthly report. In a joint report presented earlier this month, four of German leading economic institutes also warned of inflation risk that might be triggered by the ECB's plan.