Bank acts to calm Europe's markets
Source: Agencies |
August 5, 2011, Friday
|
Print Edition
Print Edition
THE European Central Bank acted yesterday to calm euro-zone markets and throw a lifeline to Italy and Spain by announcing new steps to keep banks supplied with unlimited, longer-term funds and signaling it was buying government bonds.
The ECB's president, Jean-Claude Trichet, said the bank's program of buying government bonds, inactive since March, will now continue.
Traders said they saw the ECB enter the market as Trichet spoke.
Trichet said the bank would conduct a six-month liquidity operation and continue to providing unlimited short-term funds to banks at least until next January.
Many banks in Greece, Portugal and Ireland remain shut out of market funding and some Spanish and Italian lenders are also dependent on ECB funds.
The European Commission meanwhile urged eurozone leaders to consider increasing the size of their financial rescue fund to prevent the bloc's sovereign debt crisis from continuing to spread.
In a letter to European Union leaders, commission president Jose Manuel Barroso said: "I urge a rapid reassessment of all elements related to the European Financial Stability Facility, and concomitantly the European Stability Mechanism, in order to ensure they are equipped with the means for dealing with contagious risk."
EU paymaster Germany rebuffed the call in a swift response. A finance ministry spokesman said it was unclear how reopening the debate about financial backstops so soon after last month's emergency summit can help calm markets.
The EFSF, which has bailed out Ireland and Portugal and will run a planned second package for Greece, has a maximum capacity of 440 billion euros (US$620 billion). It will be replaced in 2013 by a 500 billion euro permanent ESM. The 17 eurozone leaders left the size unchanged when they agreed on July 21 to widen the funds' role to buying bonds in the secondary market and providing precautionary credit lines to states under pressure on credit markets.
Market analysts and economists say the EFSF would need to be at least doubled and perhaps trebled to preempt attacks on larger economies such as Italy and Spain.
Italian and Spanish bond yields fell from 14-year highs as markets anticipated ECB action. Spain sold 3.3 billion euros in short-term bonds but had to pay a sharply higher borrowing cost.
Elsewhere, Japanese authorities acted to weaken a strong yen, joining Switzerland in efforts to tame currencies buoyed by the demand for safe havens from investors concerned about the health of the global economy and the eurozone's debt woes.
The ECB's president, Jean-Claude Trichet, said the bank's program of buying government bonds, inactive since March, will now continue.
Traders said they saw the ECB enter the market as Trichet spoke.
Trichet said the bank would conduct a six-month liquidity operation and continue to providing unlimited short-term funds to banks at least until next January.
Many banks in Greece, Portugal and Ireland remain shut out of market funding and some Spanish and Italian lenders are also dependent on ECB funds.
The European Commission meanwhile urged eurozone leaders to consider increasing the size of their financial rescue fund to prevent the bloc's sovereign debt crisis from continuing to spread.
In a letter to European Union leaders, commission president Jose Manuel Barroso said: "I urge a rapid reassessment of all elements related to the European Financial Stability Facility, and concomitantly the European Stability Mechanism, in order to ensure they are equipped with the means for dealing with contagious risk."
EU paymaster Germany rebuffed the call in a swift response. A finance ministry spokesman said it was unclear how reopening the debate about financial backstops so soon after last month's emergency summit can help calm markets.
The EFSF, which has bailed out Ireland and Portugal and will run a planned second package for Greece, has a maximum capacity of 440 billion euros (US$620 billion). It will be replaced in 2013 by a 500 billion euro permanent ESM. The 17 eurozone leaders left the size unchanged when they agreed on July 21 to widen the funds' role to buying bonds in the secondary market and providing precautionary credit lines to states under pressure on credit markets.
Market analysts and economists say the EFSF would need to be at least doubled and perhaps trebled to preempt attacks on larger economies such as Italy and Spain.
Italian and Spanish bond yields fell from 14-year highs as markets anticipated ECB action. Spain sold 3.3 billion euros in short-term bonds but had to pay a sharply higher borrowing cost.
Elsewhere, Japanese authorities acted to weaken a strong yen, joining Switzerland in efforts to tame currencies buoyed by the demand for safe havens from investors concerned about the health of the global economy and the eurozone's debt woes.
- About Us
- |
- Terms of Use
- |
-
RSS - |
- Privacy Policy
- |
- Contact Us
- |
- Shanghai Call Center: 962288
- |
- Tip-off hotline: 52920043
- 沪ICP证：沪ICP备05050403号-1
- |
- 互联网新闻信息服务许可证：31120180004
- |
- 网络视听许可证：0909346
- |
- 广播电视节目制作许可证：沪字第354号
- |
- 增值电信业务经营许可证：沪B2-20120012
Copyright © 1999- Shanghai Daily. All rights reserved.Preferably viewed with Internet Explorer 8 or newer browsers.
