‘ECB policy must be proportionate’

'FRANKFURT: The European Central Bank's policy must be commensurate to economic conditions and respect the bank's legal framework, in particular a ban on financing governments, ECB executive board member Yves Mersch said on Saturday.

His remarks were likely to be read as an attempt to rule out the prospect of "helicopter" money distributions to euro zone citizens, an extreme form of monetary easing first described by economist Milton Friedman.

"The framework sets limits of what monetary policy must not do and pursue -- in particular prohibiting monetary financing of governments," Mersch said in a speech at an event in Cernobbio, Italy.

He added: "The Eurosystem enjoys broad discretion in the choice of its instruments. But we are responsible to use our measures proportionately and to obey the well-defined boundaries set by the legal framework."