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ECB to buy Italian and Spanish bonds

The European Central Bank, which has announced strong intervention on the markets, will buy Italian and Spanish debt according to a source close to the bank

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This purchase of sovereign debt should give a strong signal to the markets before the opening of Asian and European stock exchanges. Last Thursday, the lack of debt purchase announcement by the ECB disappointed financial markets which extended their losses.

The Governors Council met on Sunday evening to discuss measures to handle the debt crisis and the worldwide stress on financial markets . More specifically, the cases of Italy and Spain, ranked respectively 3rd and 4th economic nation in the euro zone, are a concern for market players.

Details of this bond-buying program have not been unveiled, but the amounts involved are huge: ECB will have to spend at least €240 billion for an intervention similar to what has been done for Greece. To handle the case of Greece, the bank had chosen to buy 12% of sovereign debt for €74 billion.

Paris and Berlin have expressed their concerns and urged Madrid and Rome to undertake major reforms in order to restore public finances and avoid a major crisis in the euro zone.

Next Finance , August 2011

Article also available in : English | français

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