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| ECB's Mario Draghi unveils bond-buying euro debt plan | |
| (35 minutes later) | |
| Mario Draghi, president of the European Central Bank, has unveiled details of a new bond-buying plan aimed at easing the eurozone's debt crisis. | |
| In July, Mr Draghi had said that he would do "whatever it takes" to save the euro. | In July, Mr Draghi had said that he would do "whatever it takes" to save the euro. |
| The ECB wants to help cut the borrowing costs of debt-burdened eurozone members by buying their bonds. | |
| Ahead of the announcement, the ECB kept its benchmark interest rate unchanged at 0.75%. | Ahead of the announcement, the ECB kept its benchmark interest rate unchanged at 0.75%. |
| Mr Draghi said the ECB would engage in outright monetary transactions, or OMTs, to address "severe distortions" in government bond markets based on "unfounded fears". | |
| He insisted that the ECB was "strictly within our mandate" of maintaining financial stability, but reiterated the need for governments to continue with their deficit reduction plans and labour market reforms. | |
| He added that the ECB's actions come in response to eurozone economic contraction in 2012, with continued weakness likely to continue into 2013. | |
| The ECB expects the eurozone economy to shrink by 0.4% in 2012 and grow by 0.5% in 2013, with inflation rising to 2.6%. | |
| OMTs will only be carried out in conjunction with European Financial Stability Facility or European Stability Mechanism programmes, he said. | |
| The maturities of the bonds being purchased would be between one and three years and there would be no limits on the size of bond purchases, he added. | |
| The ECB will ask the International Monetary Fund to help it monitor country compliance with its conditions. | |
| Eurozone crisis | |
| Jens Weidmann, president of Germany's Bundesbank, is vigorously opposed to the ECB's plan, concerned that member states could become hooked on central bank aid and fail to reform their economies sufficiently. | Jens Weidmann, president of Germany's Bundesbank, is vigorously opposed to the ECB's plan, concerned that member states could become hooked on central bank aid and fail to reform their economies sufficiently. |
| But the majority of the 23 ECB council members support the plan. | |
| And the Organization for Economic Co-operation and Development (OECD) added its support for the ECB bond-buying plan on Thursday, as it warned that the eurozone crisis posed the greatest risk to the global economy. | And the Organization for Economic Co-operation and Development (OECD) added its support for the ECB bond-buying plan on Thursday, as it warned that the eurozone crisis posed the greatest risk to the global economy. |
| It is calling for more action from central banks to prevent a break-up of the eurozone. | It is calling for more action from central banks to prevent a break-up of the eurozone. |
| "Concerns about the possibility of exit from the euro area are pushing up [government bond] yields, which in turn reinforces break-up fears," the OECD said in its global economic outlook. | "Concerns about the possibility of exit from the euro area are pushing up [government bond] yields, which in turn reinforces break-up fears," the OECD said in its global economic outlook. |
| "It is crucial to stem these exit fears. This could be achieved by the ECB undertaking bond market intervention to keep spreads within ranges justified by fundamentals." | "It is crucial to stem these exit fears. This could be achieved by the ECB undertaking bond market intervention to keep spreads within ranges justified by fundamentals." |
| Mr Draghi is hoping that ECB intervention in the bond markets will help reduce the borrowing costs of debt-laden countries such as Spain and Italy and lessen the likelihood of them needing to ask for a full sovereign bailout, an eventuality that could bankrupt the eurozone and cause the collapse of the euro. | Mr Draghi is hoping that ECB intervention in the bond markets will help reduce the borrowing costs of debt-laden countries such as Spain and Italy and lessen the likelihood of them needing to ask for a full sovereign bailout, an eventuality that could bankrupt the eurozone and cause the collapse of the euro. |
| Spain, which has already asked for 100bn euros (£79bn) in state aid to help its debt-stricken banks, is currently paying yields of 6.42% on its 10-year bonds, while Italy's 10-year bond yields are 5.51%, below the critical 7% figure thought likely to trigger a sovereign bailout request. | Spain, which has already asked for 100bn euros (£79bn) in state aid to help its debt-stricken banks, is currently paying yields of 6.42% on its 10-year bonds, while Italy's 10-year bond yields are 5.51%, below the critical 7% figure thought likely to trigger a sovereign bailout request. |
| In the latest of a series of diplomatic meetings focusing on the eurozone crisis, German Chancellor Angela Merkel is visiting Madrid for talks with Spanish Prime Minister Mariano Rajoy. | In the latest of a series of diplomatic meetings focusing on the eurozone crisis, German Chancellor Angela Merkel is visiting Madrid for talks with Spanish Prime Minister Mariano Rajoy. |
| In other eurozone news: | In other eurozone news: |
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