German officials have strongly played down the idea that the permanent ESM fund would be given such authority, which would allow it to tap unlimited resources through the European Central Bank's liquidity operations.
Asked if the ESM should be granted a banking license, Monti told a news conference in Finland: "I think this will help. I think this will in due course occur."
Monti, speaking to reporters after a meeting with Finnish Prime Minister Jyrki Katainen, also said he believed ECB President Mario Draghi's comments last week were "bold and appropriate". Monti also held a brief meeting with Olli Rehn, the Commissioner for economic affairs, in Helsinki.
Draghi’s comments last week set off speculation
Draghi said last week that the central bank would do whatever it takes to preserve the euro, stirring speculation it might take more radical steps when the Governing Council holds its monthly meeting today (2 August).
Katainen told journalists yesterday that interest rates were too high in some European countries, such as Italy, and that sovereign bond markets were not properly assessing the economic situation of some individual countries.
Meanwhile euro zone bank-to-bank lending rates hit all-time lows on Wednesday, weighed down by growing expectations the European Central Bank will eventually cut interest rates again after its chief pledged to do whatever it takes to preserve the euro.
ECB President Mario Draghi's comments last Thursday fanned expectations the bank could cut rates to below the current record low of 0.75% and may start charging banks for depositing funds with the ECB overnight.
Waiting for Draghi’s next move
Money markets are not pricing in a rate cut at today's policy meeting, with the probability of a negative deposit rate by year end now at 50%, according to forward overnight rates.
Speculation has focused instead on whether the bank will resume buying Spanish and Italian bonds in the secondary market or take more radical action, such as starting a large-scale asset purchase programme.
Much will depend on what exactly Draghi says today. German officials have in recent days reiterated their opposition to the eurozone's rescue fund being granted a banking licence, increasing the funds available to it for such an operation.
