A top European Central Bank policy maker has publicly backed the rapid use of the euro zone’s bailout fund to buy distressed sovereign bonds on the open market, saying such action could ease the “very severe strain” being felt by Spain and Italy.
Speaking to the Financial Times, Benoît Cœuré, the ECB executive board member who oversees financial market operations, also said a cut in interest rates was likely to be discussed at next month’s ECB rate-setting meeting, to help boost confidence. But he stressed that political agreement on fiscal integration was needed to tackle the euro zone’s underlying problems.
Mr Cœuré expressed surprise that no government had yet asked the European Financial Stability Facility, the euro zone’s 440 billion euros rescue fund, to buy sovereign bonds to drive down borrowing costs.
“Certainly it’s a mystery why the EFSF was allowed almost a year ago to undertake secondary market interventions and governments have not yet chosen to use that possibility,” Mr Cœuré said on Wednesday.
At a summit of the Group of 20 leading economies in Mexico on Monday, Mario Monti, Italy’s prime minister, raised the possibility of using the EFSF to buy bonds. Angela Merkel, Germany’s chancellor, however, failed to endorse the idea.Page 1 of 3 | Next Page