European Central Bank To Boost Spain And Italy To Avoid Financial Disaster
- Posted on August 7, 2011 at 6:16pm by
Christopher Santarelli
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The European Central Bank says it will “actively implement” a bond-purchase program that could boost Spanish and Italian bonds and drive down interest yields that threaten those countries with financial disaster.
Such purchases by the central bank could help Rome and Madrid fend off market trouble until a strengthened eurozone bailout fund is approved to help them.
Sunday’s statement comes as officials worked to ward off more turmoil as financial markets prepared to reopen on Monday after the U.S. lost its triple-A bond rating from Standard & Poor’s after market close Friday. Officials from the Group of 20 rich and developing countries also held talks aimed at minimizing market shocks. G-7 officials were reportedly to confer before markets open in Asia on Monday open as well.
The burst of activity on a Sunday in August underscored how government debt levels in Europe and the U.S. have unsettled financial markets – and sharpened fears that debt troubles could derail the global recovery from the 2007-2009 financial crisis.
The statement from the ECB, issued after a conference call among its officials, did not say which countries’ bonds it would buy.
But the beneficiaries are expected to be Italy and Spain, market analysts say. Italy and Spain are trying to avoid the spiraling interest rates that forced Greece, Ireland and Portugal to seek bailout loans. Purchases could drive up bond prices, which move in the opposite directions from interest yields.
Last week, yields for both countries were above 6 percent, moving toward the levels that upended the three smaller countries. Italy in particular is regarded as too large for Europe’s euro440 billion bailout fund to rescue, raising the possibility of a financial disaster that could devastate the eurozone economy.
Analysts at Royal Bank of Scotland said recent moves by Italy to strengthen its finances helped bring the ECB to its decision. The bank was reluctant to come to the rescue unless governments first close the holes in their finances.
The statement Sunday said it was “essential” for them to follow through on their commitments.
Italian Premier Silvio Berlusconi said last week that Italy would balance its budget in 2013, a year earlier than previously expected, and speed up other budget measures.
“The ECB will start a large scale bond buying of Italian and Spanish sovereign bonds on Monday morning in our view as euro area governments have signed up to additional fiscal measures where needed,” they said.
They said the purchases could run euro2.5 billion ($3.5 billion) a day and “will stop the collapse of the bond market in countries under stress.”
Italy has debt equivalent to 120 percent of annual economic output, the second highest in the eurozone behind Greece, and weak prospects for economic growth that would help pay it down.
Sunday’s meeting comes just hours before the opening of financial markets in Asia, after Friday’s downgrade of the U.S. credit rating from AAA to AA plus by ratings agency Standard & Poor’s has led to fears of more stock market plunges.
Last week already saw markets around the world deep in the red amid fears the global economy may be weakening and the uncertainty created by Europe’s sovereign debt crisis.
In a sign of early fallout, Middle East markets tumbled Sunday on the first day of business after the downgrade.
Middle East markets, open Sunday through Thursday, were the first to react to the downgrade. Egypt’s benchmark EGX30 index fell more than 4 percent, and other Gulf markets also were sharply lower.
Israel‘s Tel Aviv Stock Exchange delayed the start of the week’s first session after pre-market trade showed the benchmark index dropping more than 6 percent because of concerns over the U.S. debt rating cut. Exchange spokeswoman Idit Yaaron said the start was pushed back by 45 minutes “so market players will have time to react logically and not under pressure.”
Israel’s benchmark TA-25 index plunged 7 percent to close at 1,074 points.
U.S. markets and others reopen Monday but have had rough patches recently. The Dow Jones industrial average dropped 512 points Thursday, its worst performance since the financial crisis of 2008, and regained only a fraction of that drop Friday.
Many economists see the world’s big central banks as the last line of defense at this moment in the crisis, after policymakers in Europe and the U.S. have failed to agree on the kind of shock-and-awe moves that many investors demand.
Investors have also been calling on the U.S. Federal Reserve to start pumping money into the American economy again to help underpin the slowing economic recovery.
The Associated Press contributed to this article.
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StrongWesternbabeluvinherWesternMAN
Posted on August 8, 2011 at 12:27amReady to send your kids and grandkids to an island to learn socialism? We must stand up for why this nation was formed and not let the psuedo-intellectuals TRUMP THE COMMON SENSE of this nation!
Report Post »JohnnyGalt
Posted on August 7, 2011 at 8:53pmhttp://footofatlas.blogspot.com/
Report Post »wub
Posted on August 7, 2011 at 8:53pmProof gain, and again, and again, that capitalism is sound only in the books and in the minds of lunatic freaks like Ayn Rand, Paul Rand…Practically, the government has been and is always in the driving seat of a country’s economic development. Capitalism worked in the past only because of the unjust and unfair labor from slaves and the rest of the world community, which has been acquired through the coercive power of the white government.
Report Post »13th Imam
Posted on August 7, 2011 at 9:21pmThank you Mr Alinsky
But, No Thanks
Socialist’s are like coat thieves. Eventually they drown from the weight of other peoples work ethics.
Report Post »joe1234
Posted on August 7, 2011 at 9:27pm@wub, its proof once again that socialism doesn’t work…capitalism worked wonders in this country from our founding until the fascist progressives got into power in the early 19th century.
how many centuries of failure is it going to take brain-dead socialists like you to get a clue that socialism doesn’t work?
ICRedifURBlue
Posted on August 7, 2011 at 10:32pmThe ONLY way socialism works……I keep Mine……I Get 1/2 of yours……you split what’s left with your neighbors…..works for me…oh, and if you complain I take it all and you get to vacation at a re-education camp………..have a nice life……
Report Post »Miljunk
Posted on August 8, 2011 at 2:00amyou have got to be kidding me! If you even think that the world economy or our economy resembles a free market capitalistic system then you are an idiot. With almost everything in our economy being subsidized, price controlled and regulated there is no true capitalism in our society. Unless you want to count the internet which we all know is littered with slave labor. Why is it that the internet has produced more 1st generation millionaires in the last 20 years then in all of history combined? Because it is not regulated. Governments are destroyers of wealth, unbridled supply and demand economics is the only way to build wealth not your failed Keynesian Economics
Frickin tool!
Report Post »smithclar3nc3
Posted on August 8, 2011 at 10:13amWUB,
Report Post »Europe is socialist you dult, And Ireland,Greece,Spain,Portugal,France,Italy,Holland,and others are all collapsing under the wheels of bloated government.
Socialism will never ever work because in the end it pays the non-productive from the labor of the productive. So sooner or later the needs of the non productive will out pace the labor of the productive.
Socialism will never and has never worked, How ever under Capitalism the world took a 5000 year leap in just over a century. Ever advancement in our culture be it medical,ecological,industrial,transportational,or media is BECAUSE OF CAPITALISM
You would still be walking or riding horses,living a low statndard shack housing,heating withy fire,no a/c,washing what little clothes you could get in a river, getting a news paper once a month,sh*tting in a hole behind your shack,dying 40 years earlier if not for Capitalism. Look at under developes parts of Africa and that where you would be without Capitalism.
This_Individual
Posted on August 7, 2011 at 8:08pmIt aint gonna work. Seeing as though that bank is going under as well.
Report Post »This_Individual
Posted on August 7, 2011 at 8:06pmIt aint gonna work. It’s all comming down
Report Post »NHwinter
Posted on August 7, 2011 at 7:51pmIsn’t it interesting how a few individuals with an evil plan, Piven, Ayers,Soros, Van Jones, Gore,etc. and their president, can bring down the world’s economy. Just amazing and our Senators just watch as it happens, some very compliant. Then there are those who thinks these people really have their welfare at heart. What is it going to take to open their eyes? Too late already?
Report Post »llotus
Posted on August 7, 2011 at 7:19pmI hope someone in D.C. is keepin an eye on our newly printed money, we dont want them Europeans gettin their fare share. We are going to need all of ours. We and the world are in a crisis and all they can do is look at each other and say, duh. And also……dont give the world our oil. Too many twitts in high places. Lotus.
Report Post »Jenny Lind
Posted on August 7, 2011 at 7:13pmReally? We are shocked, horrified and amazed! Open up the piggy bank boys, and sink some more money in the sink-holes of socialism, fools!
Report Post »Cynic-clinic
Posted on August 7, 2011 at 7:09pmWhen everything else fails, the European Central Bank (ECB) can sell all their junk bonds to China which will then own Europe, the US, Spain, Portugal and a few other countries.
That’s how World War 3 is conducted and not a shot is fired. We all better learn to use chopsticks !!
Report Post »grelchfurball
Posted on August 7, 2011 at 7:07pmand their leaders talked and talked,but nothing could stem the avalanche…….
Report Post »quote from ‘ the road warrior ’……are we there yet…..i think may be….
TRILO
Posted on August 7, 2011 at 7:04pmSomehow this does not seem like it will end well.
Report Post »LQQKIN IN
Posted on August 7, 2011 at 6:52pmHang on folk‘s we’re on the obama drives the bus over the clif tour. QE3 is waiting at the bottom.
Report Post »But first one more round of golf.
chicago76
Posted on August 7, 2011 at 6:51pmAmerica and Europe are parasites on the world. We create nothing but war and welfare, and use the banking system American and Europe created to suck the life out of other countries to pay for wars and welfare.
Report Post »LQQKIN IN
Posted on August 7, 2011 at 7:03pmPlease tell us who you feel are not parasites on this earth?
Report Post »designbyinspiration
Posted on August 7, 2011 at 7:03pmThat’s a lie, 20 years ago everything was made with quality in Japan, 30 years ago, it was cheap-arse junk from Taiwan and Japan – like we now have from India, Pakistan, Malaysia and china.
Japan and Taiwan are now 1st class nations because of how we purchased labor from them, They are now consumers buying junk from China like us!
We build nations, not destroy.. So what you said is a complete fabrication.
Report Post »NHwinter
Posted on August 7, 2011 at 8:00pmHes from Chicago, what did you expect from him!
Report Post »chicago76
Posted on August 7, 2011 at 6:49pmSo Europe has decided to print money too. I guess the whole idea is that if you are big enough you can print so much money that you can buy your way out of it and if everyone else in the world has to accept that money then bonus.
Report Post »Psychosis
Posted on August 7, 2011 at 6:45pmin other words
WE WILL BAIL THEM OUT, just like last time, where we sent money secretly in our last bailout
60% of eu bailouts was funded by the US
Report Post »Elliot Fleming
Posted on August 7, 2011 at 6:37pmThis sounds familiar… hmm
Report Post »designbyinspiration
Posted on August 7, 2011 at 6:35pmUmm. That was sarcasm, right? The HAVE a problem. Same as we do. This is like in those movies where the main character has to die to be saved. Financially, we need to break -after we dump the marxists in charge- and reset our system from tax methods to banking refs. This crowbaring of our system by domestic enemies cannot be allowed to happen again.
Report Post »designbyinspiration
Posted on August 7, 2011 at 6:40pmYou know, thinking about his problem, maybe I’m a bit slow, but the ‘Redistribution of wealth’ IS DEFACTO SOCIALISM. How else can they ‘run out of other peoples money’ as Maggie Thacher so aptly quoted, if they didn’t redistribute it in the first place. I hate these guys. They’re plain evil.
Report Post »redbone007
Posted on August 7, 2011 at 6:31pmWhere our President this weekend, playing golfs. Can you believe it, playing golfs while the other world leaders trying to come up with a solution to save thier country.
Report Post »llotus
Posted on August 7, 2011 at 7:28pmRedboneoo…..he not only insults Americas strongest allies……he insults the American people. And he is arigant as he does it. He wants to make us eat it and like it but it will not happen. Lotus.
Report Post »13th Imam
Posted on August 7, 2011 at 9:53pmWe are better off when he play’s golf
Report Post »TeaPartyPatriot
Posted on August 7, 2011 at 6:25pmBAILOUTS DO NOT WORK !!!!! They only shift the problem from one place to another. These euro-nuts are as stupid as the lunatic-left d-cRAT socialists who, like monkeys, mimic every stupid action of their euro-socialist pals.
Report Post »Shasta
Posted on August 7, 2011 at 6:36pmYes, but all bailouts do redistribute wealth, which is a primary reason for them.This is all going according to the lib’s plan
Report Post »Cat
Posted on August 7, 2011 at 6:23pmA giant house of cards soon to become floor covering.
Report Post »MODEL82A1
Posted on August 7, 2011 at 6:19pmWhew!!! Close one! Europe almost had a problem there.
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