ECB Buys Euro Debt

According to a Washington Post report from Berlin, the European Central Bank made record purchases of government bonds last week, going further than many analysts had expected to hold down the borrowing costs of Italy and Spain, two of the largest countries caught up in the continent’s debt crisis.

The $30 billion in government debt purchased by the central bank last week eclipsed the previous $20 billion bought in the days after it agreed last year to use its financial power to help restrain interest rates paid by weakened European governments. Increasing the demand for a government’s bonds lowers the interest rate it pays.

However, despite the steps taken by both Lawmakers and bankers in Europe, borrowing costs for both Italy and Spain still soared, contributing to a recent sell-off on global stock markets. The ECB has become a key backstop for strapped European nations like Greece, Ireland and Portugal, holding an estimated 16% of their outstanding debt after a year of at-times aggressive buying. Meaning that at worst, other countries in the Eurozone may be left holding the bag of bad debt.

European leaders approved what they regarded as a dramatic set of steps in late July to convince global investors that the 17 nations that share the euro currency are solvent and will pay their bills.

Despite all the developments though, many investors still seem spooked by last week‘s tumultuous market developments and investment into European debt may still be a long ways away.

(아주경제 앤드류 이 기자)

Park Sae-jin swatchsjp@ajunews.com