ECB's Draghi said to push unlimited bond buying
ECB chief Draghi will propose a plan to ease the borrowing costs of troubled euro nations, such as Spain's and Italy's, by buying unlimited amounts of their government bonds, according to a new report. Draghi's plan would have to be approved by the bank's governing council.
ECB chief Draghi will propose a plan to ease the borrowing costs of troubled euro nations, such as Spain's and Italy's, by buying unlimited amounts of their government bonds, according to a new report. Draghi's plan would have to be approved by the bank's governing council.
The euro gained versus the dollar and听European stocks got a short-lived boost听after a report that Mario Draghi, the European Central Bank (ECB) chief, would propose unlimited bond buying at a meeting on Thursday.
The bond buying would be sterilized, i.e. the central bank would mop up the additional money supply created by its purchases, Bloomberg reported, citing anonymous central bank officials.
听The program would focus only on government debt with maturities of up to three years, and the plan would refrain from capping borrowing costs for troubled euro zone countries,听as recent reports have suggested.
听The euro rose to a session high above 1.26 against the dollar after the news crossed the wires. An ECB spokesman declined to comment on the report.
听Speculation has been rife that the ECB will announce new measures to support countries such as Spain and Italy, which have faced rising borrowing costs in recent months.
听顿谤补驳丑颈听skipped the annual meeting of central bankers听in Jackson Hole, Wyoming last week due to a heavy workload.
听Even if the details of the proposal are true, there's no guarantee they will be approved at Thursday's meeting in Frankfurt. The Financial Times reported last week that听ECB technocrats were preparing a number of options听for the Governing Council to consider.
Spain's situation is looking particularly dire because of a flight of capital asbusinesses and consumers have pulled money听from the banking system over fears Spain could face the same fate as Greece. (Read More:听Spain's Capital Flight Now Worse Than Asian Financial Crisis)
Pressure on the ECB to act has been rising from various political quarters. Earlier on Wednesday, the Organization for Economic Cooperation and Development (OECD) said the ECB should support countries like Spain, which are carrying out "necessary adjustments."
But Germany's central bank has opposed further bond buying, with reports last week that the Bundesbank chief Jens Weidmann had听threatened to resign from the ECB. Weidmann has said bond buying could become addictive like a drug for governments.
A prominent German economist, who supervised Weidmann's doctoral thesisvoiced support for Weidmann's stance听of opposing unlimited bond buying.
鈥淭he understanding when they started in 2010 was鈥� well we have to buy some bonds simply to keep the market floating, to keep them flexible, but meanwhile, it鈥檚 clear this is not the idea,鈥� Manfred Neumann, Professor of Economics at the Institute for Economic Policy at the University of Bonn told CNBC on Tuesday.
A decision by the ECB is due at 1:45 p.m. Frankfurt time Thursday, followed by a press conference to be addressed by Draghi at 2:30 p.m.