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EU bailout funds, ECB preparing joint action-paper

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July 27, 2012, 1:56 p.m. | World — by Reuters

PARIS — Euro zone governments and the European Central Bank are preparing to intervene on financial markets to help bring down Spanish and Italian borrowing costs, French afternoon daily Le Monde reported on Friday.
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Reuters

PARIS — Euro zone governments and the European Central Bank are preparing to intervene on financial markets to help bring down Spanish and Italian borrowing costs, French afternoon daily Le Monde reported on Friday.

The newspaper, which cited unnamed sources, said the ECB was willing to take part in the action on condition that governments agreed to tap the bloc's bailout funds, the European Financial Stability Facility and the European Stability Mechanism.

Under the plan, the EFSF could be activated first to purchase Spanish and Italian debt on the primary market, followed by the ESM in September, after it becomes operational.

The ECB would at the same time buy Spanish and Italian government bonds itself on the secondary market.

The newspaper said the plan was days or possibly weeks away from being finalised and that officials were holding consultations on Friday about it.

A source close to French President Francois Hollande said that he planned to speak to German Chancellor Angela Merkel at around 1100 GMT about implementing decisions taken at a June EU summit that proposed new measures for tackling the debt crisis.

ECB President Mario Draghi pledged on Thursday to do whatever was necessary to preserve the euro, sending a strong signal that it might take action on Spanish and Italian borrowing costs.

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