Tuesday

6th Jun 2023

ECB returns to markets to help Italy and Spain

  • Trichet said governments must stay 'ahead of the curve' (Photo: European Commission)

The European Central Bank (ECB) has decided to go back to markets to buy bonds from troubled eurozone countries after a five-month pause in a bid to stem the crisis from spilling to Italy and Spain.

"I wouldn't be surprised that before the end of this conference you would see something on the market," ECB chief Jean Claude Trichet said during a press conference in Frankfurt on Thursday (4 August) afternoon after the monthly meeting of the bank's governing board.

Read and decide

Join EUobserver today

Become an expert on Europe

Get instant access to all articles — and 20 years of archives. 14-day free trial.

... or subscribe as a group

"If we intervene, we intervene and we'll publish the amount of what we have done," he added, referring to the bond purchase as a "non-standard measure" aimed to facilitate the flow of money in the 17-country strong eurozone.

He refused to give any details as to the amount and origin of the government bonds to be purchased in the short term.

But traders in London reported that Irish and Portuguese bonds were first in line, with no news of Italian and Spanish purchases.

Trichet acknowledged that the bond-buying move was not backed by all the members of the bank's governing board. But he said there was an "overwhelming majority" in favour. It is the first time since March that the ECB is going to the markets to ease the pressure of the spreading debt crisis.

Trichet also joined calls made earlier by EU commission chief Jose Manuel Barroso for national governments, parliaments and the EU legislature to implement the details of the July deal on a second Greek bailout, which also gives extra powers to the EU bailout fund (EFSF), including that of purchasing bonds on the markets.

"We expect all these decisions taken by leaders in July to be executed fully and in a very effective and rapid fashion," he said. "What has been said by the heads is that they will rapidly finalise negotiations with the European Parliament. We consider it's essential to have a strong rigorous surveillance."

As to Italy and Spain's efforts to resist being drawn into the debt crisis, Trichet insisted that "all governments have to be ahead of the curve. This is of course true for Italy as well as all others."

The 10-year Italian and Spanish bond yields started and finished the press conference at 6.1 percent, still above the six-percent margin considered to be unsustainable.

Market analysts are sceptical that the ECB bond-purchasing move will succeed in halting crisis contagion.

"The track record of the ECB's bond purchasing programme so far is anything but promising. As long as it remains a half-hearted mission ... it will probably not be enough," Carsten Brzeski, a senior economist with ING Belgium said in a statement.

Mass strikes, protests hit Italy, Spain over EU-imposed austerity

Popular anger over Europe’s strategy of austerity for exiting the eurozone crisis spread to Italy on Tuesday as the country was paralysed by a general strike. Hundreds of thousands of ordinary Italians poured into the streets of over a hundred cities and towns to protest what Brussels, Frankfurt and Berlin demand.

Italy sides with Germany against eurobonds

At Italy’s first invitation for an audience before the Franco-German duo that powers European decision-making, Prime Minister Mario Monti made it clear he backs the German position on eurobonds.

ECB will not become bank of last resort, Draghi says

In his first appearance as head of the ECB, Mario Draghi has said the Frankfurt-based bank will not become the lender of last resort for the eurozone. The bank lowered its interest rate by 25 basis points to 1.25 percent.

Berlusconi faces make-or-break confidence vote

Italian Prime Minister Silvio Berlusconi will on Friday confront the political trial of his career: a vote of confidence in parliament on the septuagenarian leader, forced on him as the economic crisis transforms into a political one.

Analysis

Final steps for EU's due diligence on supply chains law

Final negotiations on the EU due diligence law begin this week. But will this law make companies embed due diligence requirements in their internal processes or incentive them to outsource their obligations to third parties?

Latest News

  1. Final steps for EU's due diligence on supply chains law
  2. Top EU court rules Poland's court reforms 'infringe law'
  3. Sweden's far-right is most anti-Green Deal party in EU
  4. Strengthening recovery, resilience and democracy in regions, cities and villages
  5. Why Hungary cannot be permitted to hold EU presidency
  6. Subcontracting rules allow firms to bypass EU labour rights
  7. Asylum and SLAPP positions in focus This WEEK
  8. Spanish PM to delay EU presidency speech due to snap election

Stakeholders' Highlights

  1. International Sustainable Finance CentreJoin CEE Sustainable Finance Summit, 15 – 19 May 2023, high-level event for finance & business
  2. ICLEISeven actionable measures to make food procurement in Europe more sustainable
  3. World BankWorld Bank Report Highlights Role of Human Development for a Successful Green Transition in Europe
  4. Nordic Council of MinistersNordic summit to step up the fight against food loss and waste
  5. Nordic Council of MinistersThink-tank: Strengthen co-operation around tech giants’ influence in the Nordics
  6. EFBWWEFBWW calls for the EC to stop exploitation in subcontracting chains

Join EUobserver

Support quality EU news

Join us