Extending liquidity support to insolvent banks is a case in point. But, even in this admittedly fuzzier terrain that separates liquidity provision from solvency support, the ECB operates in a sound framework that has passed multiple resilience tests in recent years. In the case of Greece, for instance, the choices of the Governing Council were another example of strict adherence to this framework. In keeping with Article 123 of the Treaty, which prohibits the ECB from monetary financing, the Governing Council imposed strict limits on the use of government securities as collateral for loans that the Greek banks received from the ECB. We nevertheless continued to supply the necessary liquidity so as to ensure the functioning of the Greek banking system and the continuation of lending to businesses and households. This was in line with the principle by which the Eurosystem may lend to banks which are solvent and have sufficient collateral. To sum up, the balance we achieved with our interventions during the 4/6  BIS central bankers' speeches  Greek crisis was fully within our mandate; it respected the political commitment to the single currency contained in the Treaty, but at the same time we implemented that commitment within the limits of our Statute. The Treaty prohibition of monetary financing has been a key element in preserving the monetary policy nature of OMTs and the public sector purchase programme (PSPP). The technical features of OMTs imply that they would only be considered if warranted from a monetary policy perspective.
There is no doubt that monetary policy has had beneficial effects on government finances; monetary policy has unavoidable implications for public budgets. The same kind of indirect support occurred during the easing cycle in the early 2000s, when our main refinancing rate was reduced to 2% – a very low level at the time – and was maintained at that level for more than two years. The fiscal ramifications of monetary policy that we see today (and in the early 2000s), however, differ fundamentally from the deliberately coordinated strategy of monetary financing that we observed in some countries in the 1970s. Today the use of any central bank instrument has to be justified solely on the basis of the central bank’s narrow price stability objective, and not on any fiscal consequences thereof. Borrowing from the theory of monetary regimes, it is the dominance of the central bank mandate over the objective governing fiscal conduct that differentiates the setting of monetary policy today from anything we saw prior to monetary union. The ECB continues to have the necessary institutional independence, the financial resources and operational capacity to take all appropriate measures, if and when needed, to counter upside or downside risks to price stability in a truly symmetric fashion. It could be argued that there are multiple channels through which the central bank could take on tasks and obligations that pertain to the fiscal authority, and some of these channels are both more subtle and less apparent than outright financing of public deficits.