Brussels, 02/08/2012 (Agence Europe) - The Italian prime minister, Mario Monti, and his Spanish counterpart, Mariano Rajoy, said at a joint press conference after their meeting in Madrid on Thursday 2 August 2012 that they will be working more closely to solve the debt problems facing the eurozone in general and their two countries in particular. The Italian prime minister said he would be “studying” the option of making an official request for activation of the European Financial Stability Fund (EFSF) to ensure reduction in the spread for Italian bonds (in other words, the high interest rates), whereas Mariano Rajoy refused to comment.
The reactions of Monti and Rajoy were eagerly awaited after the statement made by the head of the ECB, Mario Draghi, after the meeting of the ECB Governing Council earlier the same day (see separate article above). By stating that, if necessary, the ECB would buy up bonds on the secondary markets of struggling eurozone countries, as long as an official request for activation of the EFSF (or ESM) has already been made, the ECB president disappointed the financial markets because last week, he said the ECB would do “whatever it takes to save the euro”. Draghi hinted that, “in its current form”, the idea of granting the European Stability Mechanism a banking licence so it could bail out Spanish banks would contravene the EU treaties. The markets did not take long to react - the stock market fell in eurozone countries, with Spanish bank shares taking a hit.
During the day, the Spanish government managed to successfully roll over two, four and ten-year bonds totalling €3.13 billion, beating its €3 billion target. The average yield on the ten-year bonds was 6.65% (compared with 6.43% for the previous ten-year issue), sharply down on the over 7% demanded in the past week. (FG/transl.fl)