LUXEMBOURG (Reuters) -The head of the European Central Bank told euro zone finance ministers in a meeting on Thursday that the goal of the bank’s planned anti-fragmentation tool was not to close the spreads on bond yields of various euro zone countries but to normalise them, an official said.
The official added that ECB head Christine Lagarde told ministers that the tool might kick in when spreads increase beyond certain thresholds.
Fragmentation refers to a divergence in the borrowing costs of euro zone members.
A second official said Lagarde told the meeting in Luxembourg that fragmentation was a “serious” risk that would be addressed, and warned that the bank’s commitment should not be put into question.
“We have to address fragmentation risk to enable the implementation of monetary policy throughout the euro area. Fragmentation risk is a serious threat to our price stability mandate,” Lagarde told ministers, according to the second source.
“Doubting our commitment would be a serious mistake,” Lagarde said, according to the source.
(Reporting by Francesco Guarascio @fraguarascio; Editing by Leslie Adler)
