ECB can help banks, not governments after French vote: Visco | Reuters

By Francesco Canepa | WASHINGTON WASHINGTON The European Central Bank can supply cash to banks if Sunday's presidential vote in France roils markets but suppressing a rise in governments' borrowing costs would go beyond its remit, ECB policymaker Ignazio Visco said on Saturday.Investors fear that a potential run-off between eurosceptic candidates Marine Le Pen and Jean-Luc Mélenchon would raise questions about France's future in the euro zone and the very survival of the euro.This may in turn drive out bank deposits and push up borrowing costs, as measured by bond yields, for debt-laden governments such as Italy, as happened during the 2010-12 debt crisis."The problem is more long term and has to do with what happens to spreads (between government bond yields in different countries) but this transcends monetary interventions," Visco, who heads the Bank of Italy, told reporters at the International Monetary Fund and World Bank spring meetings.The ECB is on course to buy 2.3 trillion euros ($2.47 trillion) worth of mostly government bonds to boost inflation in the euro zone but is barred by European treaties from directly financing governments.Le Pen promised a referendum on France's euro membership while Mélenchon vowed to end the independence of the ECB, which is in charge of controlling inflation in the euro zone, and overhaul the European Union or hold a referendum to leave it. As France is the euro zone's second-largest economy, many fear its departure would cause the whole currency club to collapse.Visco and his Austrian counterpart Ewald Nowotny said the ECB was ready to provide lenders with Emergency Liquidity Assistance, a lifeline used to prop up the Greek banking sector, but expressed confidence that this will not be needed

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| Reuters appeared first on Firstpost.