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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12:03 pm EDT, April 12th, 2012 — Spain crisis grave, but not critical
12:05 pm EDT, April 12th, 2012 — Italy just held an ugly bond auction
12:07 pm EDT, April 12th, 2012 — OECD: Countries must do more to lower debt
12:09 pm EDT, April 12th, 2012 — Bank boards must do more to reduce the threat of the next financial crisis, report argues
12:11 pm EDT, April 12th, 2012 — US jobless claims rise to highest since January
12:13 pm EDT, April 12th, 2012 — Samaras raises coalition doubts, points to second round of voting
12:15 pm EDT, April 12th, 2012 — President Obama’s ‘Fairness’ Vision Would Bankrupt Nation
12:17 pm EDT, April 12th, 2012 — Why Germany Should Leave the Eurozone (read it all)
“The departure of Germany would take pressure off the weaker countries, and the costs of breaking up the Eurozone will have to be paid no matter who leaves.”
12:24 pm EDT, April 12th, 2012 — Wasn’t Europe fixed? Fears rise again over debt crisis
12:31 pm EDT, April 12th, 2012 — Debt crisis: live