ECB's Draghi: No excessive OMT risk to taxpayers (by William L. Watts)

FRANKFURT (MarketWatch) -- European Central Bank President Mario Draghi told German lawmakers Wednesday that the bank's program of aggressive bond purchases, known as Outright Monetary Transactions, or OMTs, won't compromise the institution's independence, create "excessive risks" for taxpayers or fuel inflation. In remarks prepared for a rare appearance before the German Bundestag in Berlin, Draghi said that by restricting interventions to the secondary market, the ECB won't violate a prohibition on central-bank financing of governments. The ECB will make all OMT-related decisions "in full independence," he said. ECB independence will be protected by a requirement that countries participating in the program fully comply with policy conditions, he said. Meanwhile, risks to taxpayers would only arise if a country were to run unsound policies, something that is "explicitly prevented" by the rules of the euro-zone rescue fund and the ECB's pledge to suspend operatons any time a country's compliance with its program comes under review, he said. By withdrawing a euro for every euro injected into the financial system by any interventions, the OMT won't contribute to inflation, he said.