EU Central Bank to buy government bonds on fears of panic selling in world stock markets
August 9th, 2011
Frankfurt, Germany (AHN) – The European Central Bank on Sunday decided to buy eurozone government bonds to deter a possible panic selling on Monday’s opening of stock market trading.
The decision was made through a tense evening video conference of the European Union’s 17 central bank governors, who were divided on the issue of purchasing sovereign debts after bailing out Portugal, Ireland and Greece last week.
The downgrading by ratings agency Standard & Poor’s of U.S. government debt over the weekend from AAA to AA+ apparently prompted the meeting.
The announcement was made amid selloffs of Italian and Spanish government bonds last week, a sign the two countries may face expensive fiscal borrowings making them the next likely candidates for bailout.
Italy happens to the world’s third largest bond market after the U.S. and Japan. In the EU, Italy and Spain are the third and fourth largest economies with annual bond issues worth $858 billion.
The world’s stock markets, particularly Wall Street, also suffered massive selloffs last week in reaction to the European debt crisis.
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Categories: Financial Stocks
