Italy, Spain praise ECB plan to support debt
ITALIAN Prime Minister Mario Monti and his Spanish counterpart, Mariano Rajoy, praised the European Central Bank's (ECB's) announcement of a plan to support their debt while declining to say if they will use the mechanism.
As Mr Monti and Mr Rajoy met in Madrid yesterday, ECB president Mario Draghi said in Frankfurt that countries must submit a request before the bank or European bail-out funds will buy their bonds.
"I don't know if the Italian government will ask for activation of this instrument," Mr Monti said.
"We must thoroughly examine the modality and whether it's helpful or not."
Mr Rajoy declined to say whether Spain would apply to the ECB system.
Bonds tumbled after Mr Draghi disappointed investors looking for tangible measures to support the monetary union's third-and fourth-biggest members. Spain and Italy risk being shut out of financial markets as they suffer contagion from the debt crisis that began in Greece almost three years ago.
Spanish 10-year yields lost more yesterday than they gained on July 26 when Mr Draghi promised to do whatever was necessary to preserve the euro. The yield on Spain's 10-year debt jumped 58 basis points, breaching the 7% level, after he spoke yesterday. Italy's yields added as many as 62 basis points.
"The decisions taken today are very positive," Mr Rajoy said at a joint press conference with Mr Monti.
Asked for a third time whether Spain would seek aid, he said only: "My answer was as clear as day."
European policy makers risk turning Italian voters against the single currency and boosting support for anti-euro parties in elections due by April unless they manage to bring down the government's borrowing costs, Mr Monti said earlier in Helsinki.
Both leaders have repeatedly called on the ECB and other European countries to act to bring down borrowing costs. Mr Rajoy, who said he spends about half his time as prime minister on anti-crisis efforts, says the country's access to markets is at risk. His government asked for a European bail-out of as much as ?100bn for its banks in June, and the government is fighting to avoid having to go back for a full sovereign rescue.
"Mr Draghi said risk premia linked to fears over the reversibility of the euro are unacceptable and must be resolved drastically," Mr Rajoy said. "I t's very comforting to hear that and to hear that the euro is irreversible."
Spain sold ?3.1bn of debt yesterday, paying 6.647% to sell 10-year bonds, compared with 6.43% last month.
Mr Draghi said the ECB intends to join forces with governments to buy bonds in sufficient quantities to ease the debt crisis.
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