The European Central Bank could take on a greater role in attempts to tackle the debt crisis in the euro zone, conditional on national governments implementing economic reforms, Silvio Peruzzo, European Economist at RBS told CNBC.
Speaking after Mario Draghi's address to the European Parliament in which the European Central Bank president told policymakers that the high borrowing costs of peripheral nations was hampering central bank policy, Peruzzo said: "The discussion that Draghi is pushing forward is very clear and it also points to an ECB which remains open minded – potentially – to a greater role in this crisis, once obviously, governments have done their job."
Peruzzo added that he believes there will be no major announcement of a change to ECB policy before the December 9 European Council meeting of EU heads of state, but he said further policy announcements were likely to include greater support for struggling regional banks.
The ECB joined with five other central banks on Wednesday to cut the cost of dollar liquidiy swaps to prevent a US dollar finding crisis in the European banking sector and Peruzzo said there could be more support unveiled at next Thursday's ECB policy meeting.
"We believe that we will see more measures going in the direction of supporting the banks at this stage in the next policy meeting on Thursday, and then it comes to the governments to create the new framework in terms of fiscal policy, that will give some leeway to the central bank potentially to move beyond the banks," he said.
Draghi gave no indication of further buying of Spanish and Italian bonds by the ECB, which Peruzzo said was dependent on agreed fiscal reforms being implemented in individual nations, but he added the central bank could purchase further bonds without the permission of a reluctant Germany.
"I think (Draghi's speech) has given some indications that what's important now; monitoring the evolution of the fiscal framework implementation and that's when I think the ECB will decide to move its stance on bond buying," he explained.
Peruzzo added: "I don't think that they really need permission from Germany to go ahead with that", but he said there would be a number of stringent conditions attached to future bond purchase agreements.
"It's difficult to create a direct link with what the bond markets are doing at this stage, but certainly I think Draghi called once again for what Trichet liked to call 'a Quantum Leap in fiscal policy'.
"Conditional on that happening, that shifts the focus now on the ninth of December meeting, the ECB could decide to become more aggressive in a new context of conditionality," Peruzzo said.
Austerity Measures Part of the Problem?
However, he conceded that there was a significant risk to growth with the implementation of tough austerity measures in Europe.
"It's very difficult to conceive how such a high degree of austerity will not have some negative implications for growth and that's one of the biggest risks I think in this stylized sequencing that the European policymakers are trying to implement," he said.
Pointing to Italy and the efforts of Prime Minister-delegate Mario Monti, Peruzzo said: "Mario Monti is trying to bring the growth case on the negotiation table with Germany and France, but it's very tough... It's very tough because we know that they've committed unconditionally to accept the fiscal targets that they've pledged to their European partners so implementation risk remains high."