The European Central Bank may intervene to pull down Madrid’s borrowing costs as prime minister Mariano Rajoy warned that debt had created a “vicious circle that strangles Spain”.
Benoit Coeure, an executive director of the ECB, said the bank could restart its sovereign bond buying programme in a move likely to antagonize Germany but relieve a spiralling political, economic and social crisis in Spain.
Mr Coeure said that market fears over Spain were “not justified” but he added: “Will the ECB intervene? We have an instrument, the securities markets programme [SMP] which hasn’t been used recently but it still exists.”
Bond traders were soothed by the comments. The yield on Spain’s benchmark 10-year bonds was pulled back from 6pc on Tuesday to 5.88pc, while the yield on Italy’s 10-year debt also dropped marginally, to 5.54pc.
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VN:F [1.9.22_1171]ECB may act to bring down Spanish borrowing costs (15),