Calls have been made for the ECB president to use the full firepower of the ECB to buy the bonds of Spain and Italy. to force their yields down. Analysts from Nomura stated that Draghi could in theory announce that he is capping the yields of Spanish and Italian debts at 3%. This would help to bring down the costs of borrowing for both nations, and alleviate the eurozone crisis.
ECB President Mario Draghi stated that he will do all in his power to ensure the sustainability of the euro. His sentiments were backed today by France’s Hollande and Germany’s Merkel.
Spanish two-year bond yields spiked above 7% on Wednesday morning, marking a fresh euro era high. The rise fuelled fears that Madrid is effectively locked out of the bond markets and will be compelled to seek a bailout or turn to the European Central Bank (ECB). That was compounded by a report in Spain’s elEconomista, which claimed that Germany had urged Spain to request a €300bn bailout.
The funds would initially come in the form of a €100bn loan from the eurozone’s temporary bail-out pot, the European Financial Stability Facility (EFSF). The rest would become available once the European Stability Mechanism (ESM) came into effect, the paper said.The deficit targets for Spain have been eased from 5.3% to 6.5% to give the country more time and leeway to meet its deficit targets.