The European Central Bank said yesterday that it would “actively” renew eurozone bond purchases after Italy and Spain announced new measures and reforms to bolster their economies.
The ECB governing council welcomed additional steps by Rome and Madrid and said it considered their “decisive and swift implementation by both governments as essential in order to substantially enhance the competitiveness and flexibility of their economies, and to rapidly reduce public deficits.”
It also stressed the “decisive importance” of each government’s declared intention “to fully honour their own individual sovereign signature as a key element in ensuring financial stability in the euro area as a whole.”
That meant governments had pledged to honour their debts and not consider default as a way of resolving debt problems.
Given those conditions, along with decisions taken at an emergency July 21 eurozone summit, “the ECB will actively implement its Securities Markets Programme,” which purchases bonds issued by eurozone governments on secondary markets.
Although the ECB did not say explicitly that it would buy Italian and Spanish bonds to ease pressure on the third- and fourth-biggest eurozone economies, financial market analysts have been urging that the central bank take that step.
Italian Prime Minister Silvio Berlusconi has vowed that lawmakers would return early to push through additional austerity measures, including a constitutional amendment to force governments to keep balanced budgets.
Spain announced new reforms to bring in an additional €4.9 billion and help curb its public deficit. The moves were aimed at demonstrating to financial markets that the two crucial eurozone economies were serious about getting on top of their respective problems.
Fears of a global meltdown, which some see as potentially worse than the collapse in late 2008, sent vacationing European leaders into a flurry of phone calls yesterday between Berlin, London, Paris and Washington to stem the tide.
Officials from the G7 nations – Britain, Canada, France, Germany, Italy, Japan and the United States – also confirmed the need for ministerial talks on market stability, Japan’s Kyodo News agency said.