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.
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

Katrina Brought Enduring Changes to New Orleans

The city’s recovery is the result of the people and culture the city is famous for, as well as newcomers and start-up industries More

China to Open Stock Markets to Pension Funds

In unprecedented move, government to soon allow local pension funds to invest up to $94 billion in domestic shares More

Magical Photo Slides Show Native Americans in Late 1800s

Walter McClintock spent 20 years photographing the Blackfoot Indians and their vanishing culture at the dawn of the modern age More

Featured Videos

Your JavaScript is turned off or you have an old version of Adobe's Flash Player. Get the latest Flash player.
Colombians Flee Venezuela as Border Crisis Escalatesi
X
August 27, 2015 2:08 AM
Hundreds of Colombians have fled Venezuela since last week, amid an escalating border crisis between the two countries. Last week, Venezuelan President Nicolas Maduro ordered the closure of a key border crossing after smugglers injured three Venezuelan soldiers and a civilian. The president also ordered the deportation of Colombians who are in Venezuela illegally. Zlatica Hoke reports.
Video

Video Colombians Flee Venezuela as Border Crisis Escalates

Hundreds of Colombians have fled Venezuela since last week, amid an escalating border crisis between the two countries. Last week, Venezuelan President Nicolas Maduro ordered the closure of a key border crossing after smugglers injured three Venezuelan soldiers and a civilian. The president also ordered the deportation of Colombians who are in Venezuela illegally. Zlatica Hoke reports.
Video

Video Is China's Economic Data Accurate?

Some investors say China's wild stock market gyrations have been made worse by worries about the reliability of that nation's economic data. And some critics say the reports can mislead investors by painting an unrealistically-strong picture of the economy. A key China scholar says Beijing is not fudging ((manipulating)) the numbers, but that the economy is evolving quickly from smoke-stack industries to services, and the ways of tracking new economic activity are falling behind the change. V
Video

Video Next to Iran, Climate at Forefront of Obama Agenda

President Barack Obama this week announced new initiatives aimed at making it easier for Americans to access renewable energy sources such as solar and wind. Obama is not slowing down when it comes to pushing through climate change measures, an issue he says is the greatest threat to the country’s national security. VOA correspondent Aru Pande has more from the White House.
Video

Video Shipping Containers Provide Experimental Housing

Housing prices around the San Francisco Bay area are out of reach for many people, so some young entrepreneurs, artists and tech industry workers are creating their own houses using converted shipping containers. But as VOA's Mike O’Sullivan reports from Oakland, the effort requires ingenuity and dealing with restrictive local laws.
Video

Video Arctic Draws International Competition for Oil

A new geopolitical “Great Game” is underway in earth’s northernmost region, the Arctic, where Russia has claimed a large area for resource development and President Barack Obama recently approved Shell Oil Company’s test-drilling project in an area under U.S. control. Greg Flakus reports.
Video

Video Philippine Maritime Police: Chinese Fishermen a Threat to Country’s Security

China and the Philippines both claim maritime rights in the South China Sea.  That includes the right to fish in those waters. Jason Strother reports on how the Philippines is catching Chinese nationals it says are illegal poachers. He has the story from Palawan province.
Video

Video Technique May Eliminate Drill-and-Fill Dental Care

Many people dread visiting dentists because they're afraid of drills. Now, however, a technology developed by a British firm promises to eliminate the need for mechanical cleaning of dental cavities by speeding a natural process of tooth repair. VOA’s George Putic reports.
Video

Video China's Spratly Island Building Said to Light Up the Night 'Like A City'

Southeast Asian countries claim China has illegally seized territory in the Spratly islands. It is especially a concern for a Philippine mayor who says Beijing is occupying parts of his municipality. Jason Strother reports from the capital of Palawan province, Puerto Princesa.
Video

Video Ages-old Ice Reveals Secrets of Climate Change

Ice caps don't just exist at the world's poles. There are also tropical ice caps, and the largest sits atop the Peruvian Andes - but it is melting, quickly, and may be gone within the next 20 years. George Putic reports scientists are now rushing to take samples to get at the valuable information about climate change locked in the ice.
Video

Video French Experiment in Integrating Roma Under Threat

Plans to destroy France’s oldest slum have sparked an outcry on the part of its Roma residents. As Lisa Bryant reports from the Paris suburb of La Courneuve, rights groups argue the community is a fledgling experiment on integrating Roma who are often outcasts in many parts of Europe.
Video

Video Kenyans Turn to Agriculture for Business

Each year Kenyan universities continue to churn out graduates for the job market despite the already existing high rate of unemployment among youth in the country. Some of these young men and women have realized that agriculture can be as rewarding as any other business or job, and they are resorting to agribusiness in large numbers as a way of tackling unemployment. Rael Ombuor reports for VOA.
Video

Video First Women Graduate Elite Army Ranger School

Two women are making history for the U.S. Army by proving they are among the toughest of the tough. VOA's Carla Babb reports from Fort Benning, Georgia as 94 men and those two women rise as graduates of the difficult Ranger school.

VOA Blogs