A eurozone official told The Associated Press that central bank leaders were to discuss possible purchases of Italian government bonds -- a risky move but one that could help drive down bond interest yields that are threatening the heavily indebted country's finances.
In Europe, attention focused on whether the ECB could calm nerves by buying Italian bonds. Italian officials denied a behind-the-scenes deal had been struck with the ECB. On Friday, Silvio Berlusconi, Italian prime minister, announced his intention to balance the budget one year ahead of schedule, in 2013, after receiving a letter that morning Jean-Claude Trichet, ECB president, and his designated successor, Mario Draghi.
Umberto Bossi, leader of the rightwing Northern League, a key partner in Mr Berlusconi’s coalition, said speeding up austerity measures had ensured that the ECB would buy Italian bonds and prevent them from becoming “waste paper”.
While the German central bank is expected to maintain its opposition in principle to the ECB intervening in sovereign bond markets, the German government recognises a need for ECB intervention to bridge the “summer gap” before the European Union’s “stability facility” is given power to buy bonds in the secondary market.
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