News / Europe

European Central Bank to Buy Troubled Governments' Bonds

 Mario Draghi, the president of the European Central Bank, Frankfurt, Germany, August 2, 2012. Mario Draghi, the president of the European Central Bank, Frankfurt, Germany, August 2, 2012.
x
 Mario Draghi, the president of the European Central Bank, Frankfurt, Germany, August 2, 2012.
Mario Draghi, the president of the European Central Bank, Frankfurt, Germany, August 2, 2012.
TEXT SIZE - +
Caroline Arbour
— The European Central Bank has agreed to buy government bonds from debt-ridden Eurozone countries that request help, as part of an effort to relieve pressure from soaring borrowing costs. The much-awaited announcement in Frankfurt Thursday may benefit cash-strapped Italy and Spain, if they agree to the conditions. 

European Central Bank President Mario Draghi raised expectations of investors and the governments of Spain and Italy, when he spoke these words in July:

“The ECB is ready to do whatever it takes to preserve the euro," he said. "And believe me.  It will be enough.”

In recent months, the crisis-ridden countries of Europe have had to borrow at costs judged unsustainable, with Spanish 10-year bond interest rates hitting a record 7 percent in July.

So all eyes were on the European Central Bank Thursday to see what it would do to bring interest rates down to more acceptable levels and relieve pressure on cash-strapped governments.

The ECB president said the central bank will buy government bonds, with no set limit.

“We expect that the three-year longer-term refinancing operations will provide further support for the further stabilization in financial markets and in particular for lending activity in the euro area,” he said.

If Madrid or Rome want the bank to buy their bonds, they will have to request a bailout - and there will be strings attached and strict budgetary conditions imposed.

The International Monetary Fund will police the new loans.

Draghi said the six members of the ECB’s Executive Board and the governors of the 17 European area national central banks were all in favour of the plan, except for one: Germany.

The Bundesbank (German central bank) said that its chief, Jens Weidmann, "considers these acquisitions as effectively financing governments by printing money.”

The euro dropped in value, but European stocks were buoyed by the European Central Bank’s announcement. Madrid's main (IBEX-35) index closed up almost 5 percentage points.

German Chancellor Angela Merkel was visiting with Spanish Prime Minister Mariano Rajoy in Madrid Thursday.

Angela Merkel only said that the European Central Bank had acted within its mandate.

Mariano Rajoy said he wouldn’t comment on whether Spain would seek a bailout, since he hadn’t yet been able to study the details of the plan.

Earlier this week, the prime minister said he didn’t see the need for new conditions.

Rajoy said again Thursday Spain is committed to the euro and his government will continue doing what it can to keep its deficit in check, while trying to stimulate growth and create employment.

More than 38,000 Spaniards lost their jobs and began claiming benefits in August, the first increase in unemployment in five months.

You May Like

Multimedia Anti-Keystone XL Protests Continue

Demonstrators are worried about pipeline's effect on climate change, their traditional way of life, health and safety More

Thailand's Political Power Struggle Continues

Court gave Prime Minister Yingluck Shinawatra until May 2 to prepare her defense over abuse of power charges but uncertainty remains over election timing More

Malaysia Plane Search Tests Limits of Ocean Mapping Technology

Expert tells VOA existing equipment’s maximum operating depth is around 6 kilometers as operation continues on ocean bed for any trace of MH370 More

Featured Videos

Your JavaScript is turned off or you have an old version of Adobe's Flash Player. Get the latest Flash player.
Pet Kangaroo Helps Spread Environmental Messagei
X
Penelope Poulou
April 22, 2014 5:53 PM
Children’s author Julia Heckathorn travels the world to learn about different ecosystems and endangered animals. She pours her knowledge into children’s books, hoping the next generation will right the environmental wrongs of our times. As in many children's books, the main character in Heckathorn's stories is an animal. Unlike those other characters, though, this one is real - a kangaroo, that lives in the author’s backyard. VOA’s Penelope Poulou has more.
Video

Video Pet Kangaroo Helps Spread Environmental Message

Children’s author Julia Heckathorn travels the world to learn about different ecosystems and endangered animals. She pours her knowledge into children’s books, hoping the next generation will right the environmental wrongs of our times. As in many children's books, the main character in Heckathorn's stories is an animal. Unlike those other characters, though, this one is real - a kangaroo, that lives in the author’s backyard. VOA’s Penelope Poulou has more.
Video

Video Pro-Russian Separatists Plan 'Federalization Referendum' in Eastern Ukraine

Pro-Russian separatists in eastern Ukraine say they plan to move forward next month with a referendum vote for greater autonomy, despite the Geneva agreement reached with Russia, the U.S. and Ukraine to end the political conflict. VOA's Brian Padden reports from the city of Donetsk in Eastern Ukraine.
Video

Video Pope Francis Hopes Dual Canonizations Will Reconcile Church

On April 27, two popes - John the XXIII and John Paul II - will be made saints in a ceremony at St. Peter’s Square. VOA religion correspondent Jerome Socolovsky says the dual canonization is part of the current pope’s program to reconcile liberals and conservatives in the Roman Catholic Church.
Video

Video In Capturing Nature's Majesty, Film Makes Case for Its Survival

French filmmaker Luc Jacquet won worldwide acclaim for his 2005 Academy Award-winning documentary "March of the Penguins". Now Jacquet is back with a new film that takes movie-goers deep into the heart of a tropical rainforest - not only to celebrate its grandeur, but to make the case for its survival. VOA's Rosanne Skirble reports.
Video

Video Boston Marathon Bittersweet for Many Runners

Monday's running of the Boston Marathon was bittersweet for many of the 36,000 participants as they finished the run that was interrupted by a double bombing last year. Many gathered along the route paid respect to the four people killed as a result of two bombings near the finish line. VOA's Carolyn Presutti returned to Boston this year to follow two runners, forever changed because of the crimes.
Video

Video International Students Learn Film Production in World's Movie Capital

Hollywood - which is part of Los Angeles - is the movie capital of the world, and many aspiring filmmakers go there in hopes of breaking into the movie business. Mike O'Sullivan reports that regional universities are also a magnet for students who hope to become producers or directors.
Video

Video Pacific Rim Trade Deal Proves Elusive

With the U.S.-led war in Iraq ended and American military involvement in Afghanistan winding down, President Barack Obama has sought to pivot the country's foreign policy focus towards Asia. One aspect of that pivot is the negotiation of a free-trade agreement among 12 Pacific Rim nations. But as Obama leaves this week on a trip to four Asian countries he has found it very difficult to complete the trade pact. VOA's Ken Bredemeier has more from Washington.
Video

Video Autistic Adults Face Housing, Job Challenges

Many parents of children with disabilities fear for the future of their adult child. It can be difficult to find services to help adults with disabilities - physical, mental or emotional - find work or live on their own. The mother of an autistic boy set up a foundation to advocate for the estimated 1.2 million American adults with autism, a developmental disorder that causes communication difficulties and often social difficulties. VOA's Faiza Elmasry reports.
AppleAndroid