PARIS (Dow Jones)–The European Central Bank is able to carry out further “massive” refinancing of banks, board member Christian Noyer said Friday, noting that such central bank financing has helped support sovereign debt markets too.
“We are only limited by our will to maintain price stability and avoid inflation. But in the current situation we think we can massively refinance banks without risk,” Noyer said on French radio station Europe 1.
At the end of December, the ECB flooded European banks with EUR489.1 billion liquidity in its long-term refinancing operation, or LTRO. The central bank plans another LTRO in February.
“Since the ECB carried out its big three-year refinancing operation, sovereign debt auctions have been going very well,” Noyer said. “[Banks] have the capacity to buy sovereign debt. It’s a sure, profitable investment and there is no reason for them to be timid,” he added.
Noyer, who is also the governor of the Bank of France, defended France, as it is threatened with a two notch downgrade from triple-A by Standard & Poor’s Investors Service.
“I think that given the fiscal policy intentions and decisions, France is perfectly reliable and there is no doubt of its ability to repay all its debt,” Noyer said. French debt remains popular and the country continues to borrow at very low rates, he added.
Noyer also said the euro remains “very strong” and is an irreversible choice.
-By William Horobin, Dow Jones Newswires; +33 1 4017 1737; william.horobin@dowjones.com
Pelias' views 