| ECB may buy bonds to ensure cap on borrowing costs |
BERLIN The European Central Bank (ECB) is considering buying the bonds of crisis-wracked euro zone countries to ensure borrowing costs do not rise beyond a pre-determined level, German newsweekly Der Spiegel said on Sunday.
The bank will define an upper limit for borrowing costs in countries such as Spain and Italy and intervene in the markets to ensure it is not breached, Spiegel said, without citing its sources
Spain and Italy have seen their borrowing costs shoot up during the euro zone crisis to level that forced Greece, Portugal and Ireland to seek a bailout. At the end of trade on Friday, Spain was paying 6.39 per cent to borrow for 10 years and Italy 7.76 per cent.
In contrast, Germany was paying 1.49 per cent, as investors trust Europe’s top economy to repay them. The so-called spread, or difference, between the benchmark German bonds and the debt-wracked countries would be decisive for the proposed rate cap, Spiegel said.
ECB President Mario Draghi announced earlier in August that his institution “may” buy bonds of struggling countries if they first apply for EU bailout funds and accept tough conditions in return.
Agencies
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