2014.09.1106:16:05UTC+00ECB to push forward with ABS program

Despite doubts coming from its largest economies, the European Central Bank (ECB) is determined to push through with its recently unveiled asset backed securities (ABS) buying program designed to uplift a stagnating eurozone.

ECB president Mario Draghi announced last week that the central bank intends to purchase ABS, which are bonds backed by loans, in order to increase its balance sheet and provide more lending funds to businesses in the region. A spokesperson for the ECB said on Wednesday that the decision was made independently from other governments, but admitted that “government guarantees would play a useful role in enhancing the securitisation market in Europe and its role in funding the economic recovery”.

Both Germany and France have so far rejected the call to provide public guarantees to the risks involved with ABS calling the notion “problematic.” A report prepared jointly by their two governments claimed that public guarantees would tempt investors to disregard their own due diligence in examining transactions and would make disengaging difficult for the public sector.

Additionally, officials in Berlin say the adoption of easier monetary policy including asset purchasing programs rids governments such as France and Italy of pressure to enact structural reforms needed to promote growth.

Meanwhile, Italian officials say they are close to being ready to consider offering a public guarantee for ABS debt and called to allow eurozone members to come to their own judgements on the issue.