Wednesday, August 24

Euro-zone bond purchase proposal implemented

FRANKFURT – the European Central Bank said on Sunday it would "actively implement", his controversial bond purchase programme to combat the eurozone debt crisis, signaling it Spanish and Italian Government buys bonds, to stop financial market contagion.

After a rare Sunday night Conference the ECB welcomes new measures for the deficit and economic reform announcements of Italy and Spain as also a German promise, that the euro zone Rescue Fund is responsible for bond purchase, as soon as it is probably in October.


"It is to the above evaluations, that the ECB securities markets programme actively implement", an ECB statement said.


The statement marks a turning point in the ECB fire-fighting efforts after modest bond buying last week stop infection to the currency block larger economies.


It has not explicitly said that efforts would now buy-Spanish and Italian paper, but the fact that last week limited purchases to Irish and Portuguese paper were Italian and Spanish 10-year paper on a 14-year high sales.


Last Friday, downgrading of the AAA rating of the United States from standard & poor's added urgency of efforts to the euro-zone turbulence control by increasing the risk of the global financial crisis, global policy makers into a frenzy weekend telephone consultations to drive.


"The euro system will react intervention very clearly in the markets and in a significant and coherent manner", a eurozone said monetary source, speaking just before the statement was released.


Germany and France said in a joint statement that the EFSF would soon be bailout funds able to buy government bonds of debt Kellerkind Italy, Spain, Greece, Portugal and Ireland.


ECB President Jean-Claude Trichet called the Sunday session of the Governing Council policy setting to decide on the Italian paper buy, after Prime Minister Silvio Berlusconi announced new measures Friday to deficit reduction speed up and to speed up economic reforms.


An ECB source said that the Council would discuss any liquidity emergency measures to prevent the financial markets freeze.


Finance Ministers and central bankers from the Group of seven major powers industrialized due to hold a teleconference were late on Sunday, calm on the two euro-zone and U.S. debt crises to discuss market turmoil to action.


German Chancellor Angela Merkel and French President Nicolas Sarkozy said that she required, the authorisation to get financial stability facility Rescue Fund to end of September were by their parliaments for new powers for the European.


That allows EFSF to buy government bonds in the secondary market, if it thinks the ECB, the ECB is justified and if the eurozone agree, potentially taking Member States of the need for a policy, a powerful minority of its members strongly to oppose.


"France and Germany confident that the ECB analysis for secondary market interventions appropriate form the basis, since they help to determine the case when the financial stability of the euro area as a whole is at risk," said the Guide.


The Treaty reaffirms its statement last month granted the second bailout Greece emergency euro-zone Summit, but the focus is on the EFSF buy ability, government bonds, if the block should have ratified their new powers parliaments the ECB to do, to encourage the same in the meantime.


The ECB was votes against any resumption of purchases, argues members of 23 member last Thursday to the bond-buying program with four German, Dutch and Luxembourg, which was Bank area of monetary policy divided.


The ECB statement trying to justify this buy say it was "developed to a better transfer of our monetary policy restore decisions taking into account the dysfunctional market segments and thus to ensure price stability in the euro area."


The ECB purchased 76 billion euros in bonds of the Greek, Irish and Portuguese in the last year but purchases tailed off in January and there was none at all for more than four months.


Critics say the intervention brought only temporary relief in the bond markets and any of these countries do not store by the EU/IMF bailouts to look. Stabilization of the Italian and Spanish bond prices far more massive purchases would require, they say.


RBS analysts said in a first reaction, that while intervention might be the ECB half current Italian and Spanish bond of benchmark FPS spread German Bunds of almost 400 basis points to below 200, that use short-lived can be.


"Without guarantees that a first decline in income in the long term opportunity, exit prices look much better on the market, the ECB will will be," said a RBS note.


"We see opportunity spreads under 200 basis points to Confederation for Spain and Italy than yours." In fact, these markets are still important challenges.


"In the course of time, we believe that ongoing pressure to sell ECB/EFSF finally close will force half of traded debt instruments of the Italian and Spanish, or around EUR 850 billion," she said.


Such large European possession of southern countries debt could increase to a political backlash against bailouts in Northern Europe.


The ECB was first back from the purchase of Italian and Spanish bonds last week, the more front insertion cost-cutting measures.


Under pressure from the EU colleagues and the Central Bank of Berlusconi Announces balanced budget rule enshrined in the Constitution late Friday plans to forward load balancing of the budget for one year 2013, and push through welfare and labor market reforms after talks with the trade unions and employers.


Merkel and Sarkozy welcomes the new Italian plan.


"Above all the Italian authorities target a balanced budget to achieve is one year earlier than previously planned fundamental", she said.


Information about Italy's strict drive are but thin, so that many analysts - and maybe some in the ECB - skeptical.


After a week, the global stock markets wiped saw $2.5 trillion, are political leaders under pressure reassure investors, that Western Governments have the will and the ability to reduce the large and growing public debt load.


Who had pressure on the ECB to act to calm the markets, until the euro-zone-440-billion euro saving funds at secondary bond markets to intervene and give precautionary credit lines authorised lands in trouble is thrown.


It has also encouraged, rejected widespread calls by economists and market analysts for the euro area, the size of the European financial stability facility at least to double - a step that the EU has paymaster Germany and the France close box allies so unnecessary.


Copyright 2011 Thomson Reuters.

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