ECB Working on Bond Plan

Draghi signals central bank will join with governments to buy bonds.

European Central Bank President Mario Draghi signaled the ECB intends to join forces with governments to buy bonds in sufficient quantities to ease the region’s debt crisis, while conceding that Germany’s Bundesbank has reservations about the plan.

ECB bond purchases would likely focus on shorter-term maturities, would be conducted in a way to soothe investors’ concerns about seniority, and wouldn’t breach European Union rules prohibiting the financing of government deficits, Draghi told reporters in Frankfurt today. ECB officials are working on the plan and details will be fleshed out in coming weeks, he said.

Pressure

Financial markets and politicians had ratcheted up pressure on the ECB to act after Draghi pledged last week to do “whatever it takes” to save a euro battered for almost three years by spiraling bond yields in countries from Spain to Greece. The Bundesbank reiterated last week that it opposes further purchases of sovereign debt by the ECB, as they blur the line between fiscal and monetary policy.

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