ECB Planning Joint Bond Buys With Rescue Fund: Report

The European Central Bank (ECB) is preparing “concerted action” with euro zone countries to bring down the borrowing costs of heavily indebted countries including Spain and Italy, German newspaper Sueddeutsche Zeitung reported on Thursday.

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According to the paper, the ECB would join forces with the region’s permanent rescue fund, the European Stability Mechanism or ESM to coordinate the purchase of Italian and Spanish debt. Under the plan, the ESM would buy bonds directly from the governments, while the ECB would buy them on the market.

“Within the ECB Governing Council, there is a majority in favor of re-starting the purchases and coordinating them with governments,” the paper said, without citing sources.

The newspaper added that the ECB would not announce an official decision on such a move on Thursday. It was more likely, according to Sueddeutsche Zeitung, that ECB President Mario Draghi would echo comments he made last week, when he said the bank would do all it could to save the euro.

A final decision would follow after September 12, when Germany’s top court rules on the ratification of the ESM, which will replace the existing EFSF, the paper said.

Analysts point out that there are significant obstacles to such a move. The ESM cannot come into force until Germany approves it.

“This is all speculation which is completely unjustified at this stage,” Alistair Newton, political analyst at Nomura told CNBC.

In addition, all 17 euro zone members would need to agree to such a move, and the Dutch and Finns have already expressed their reluctance.