FRANKFURT – European Central Bank President Jean-Claude Trichet said Thursday that the ECB has resumed bond purchases and will offer banks more cash to stop the region’s debt crisis from engulfing Italy and Spain and hurting the economy.
“I wouldn’t be surprised that before the end of this teleconference you would see something on the market,” Trichet told reporters in Frankfurt after the ECB kept its benchmark interest rate at 1.5 percent. “We were not unanimous, but with overwhelming majority with regards to the bond purchases.”
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ECB purchases of Irish and Portuguese bonds during the press briefing haven’t stamped out investor concern about the 21-month crisis spreading to Italy and Spain, whose yields soared to euro-era highs this week. European officials are trying to put a firewall around Europe’s third- and fourth-largest economies to avoid seeing them forced into seeking external aid.
Italian and Spanish 10-year bonds declined, pushing the yields as high as 6.23 percent and 6.33 percent, respectively.
The euro slipped after Trichet’s comments, falling to $1.4161 at 6:37 p.m. in Frankfurt from $1.4202 at the start of the news conference.
Market fallout from the debt crisis in Europe, the political standoff on the U.S. government’s borrowing limit and concern about slower global growth prompted central banks around the world to take action this week to protect their economies.
Wednesday, the Swiss central bank unexpectedly cut interest rates and said it will take steps to stem the franc’s record- breaking gains against the euro and the dollar. Thursday, Japan sold yen to halt an appreciation, while Turkey’s central bank reduced its key rate to a record low of 5.75 percent. The Bank of England kept its key rate at 0.5 percent.
European leaders last month agreed on a second bailout package for Greece that includes voluntary contributions from private-sector bondholders and widens the scope of the European rescue fund.
Governments must still ratify the plan, which would empower the European Financial Stability Facility to start buying debt on the secondary market.
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