Free Republic

The European Central Bank has opened the door to a blitz of bond purchases and fully-fledged quantitative easing in a radical shift of policy, but only once Europe’s leaders have activated their own rescue machinery. Mario Draghi, the ECB’s president, said the bank may “undertake outright open market operations” to cap borrowing costs in those countries pushing through reforms. Intervention will be of “adequate size” to fulfil the task. “These are very strong words,” said Julian Callow from Barclays Capital. “Draghi has made it clear that the ECB is preparing to buy Spanish and Italian bonds on a much bigger...

The European Central Bank has opened the door to emergency support for the Spanish and Italian bond markets, setting off a blistering rally on bourses across the world. Picking codewords instantly understood by traders, Mr Draghi said the violent spike in bond yields in recent days was hampering "the functioning of the monetary policy transmission channels" - the exact expression used to jusfify each of the ECB's previous market interventions. Yields on Spanish two-year debt plunged 72 basis points to 5.47pc in barely an hour, with comparable moves on Italian debt - easing the pressure before a string of debt...

The International Monetary Fund is being lined up potentially to help Italy and Spain amid growing fears that a European rescue scheme will not be able to prop up the countries, it emerged last night. Reports in Italy suggested that the IMF is drawing up plans for a €600 billion (£517 billion) assistance package for the country. Spain may be offered access to IMF credit, rather than a rescue package, to avoid it being “picked off” by the markets in the coming weeks.