Tags: EU | Europe | Financial | Crisis

Europe's Central Bank Buys Record $32 Billion in Bonds

Monday, 15 Aug 2011 10:20 AM

The European Central Bank spent 22 billion euros ($31.7 billion) last week buying up government bonds in an effort to keep Italy and Spain from financial disaster.

The purchases have driven down the high interest yields that were threatening those countries' finances.

The ECB reactivated the bond-buying program after leaving it idle for four months when the financial crisis worsened earlier this month. Following a week of the program's reactivation, the yield, or interest rate, for both countries' ten-year bonds has fallen over a percentage point to below 5 percent. That's considered manageable for now.

The bank stepped in because the eurozone's bailout fund has not yet received permission from national governments to carry out such purchases.

The purchases disclosed Monday exceeded those the bank made in May, 2010 when it first launched emergency purchases of Greek bonds. Then, it bought 16.5 billion euros.

Eurozone leaders have been battling a debt crisis that threatens to spread from bailed-out Greece, Ireland and Portugal to much bigger Spain and Italy.

Eurozone leaders agreed July 21 to give their 440 bailout euro fund new powers to buy government bonds and to help recapitalize banks, but the changes will not be approved by parliaments until September.

The two powers are key because a default or drop in value of government bonds could inflict losses on banks and choke off credit to the rest of the economy.

The ECB wants the fund to take over the bond purchases, but in the interim was left as the last line of defense as a new wave of turmoil swept over markets shaken by the U.S. debt downgrade and fears about whether global growth will continue.

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The European Central Bank spent 22 billion euros ($31.7 billion) last week buying up government bonds in an effort to keep Italy and Spain from financial disaster. The purchases have driven down the high interest yields that were threatening those countries' finances. The...
EU,Europe,Financial,Crisis
278
2011-20-15
Monday, 15 Aug 2011 10:20 AM
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