Reuters with a story that the ECB are to buy packages of bad loans
The ECB are said to be in talks with the Italian government about buying bad loans under QE. Reuters cite Italian Treasury officials who say the ECB could buy them or would accept them as collateral for cash.
Italian banks have some €200bn of bad loans and it's been weighing around their necks for some time. This could go a long way to shifting a lot of it to open the door to new loans. As the debt may not fall into the rating category to make them eligible for ECB purchasing, the banks would need to purchase a guarantee from the government which would then give them the approved rating.
Reuters state that an ECB source said last Nov that in an extreme cases they could buy bad debt if the Eurozone economy was in a really bad way. The ECB declined to comment on this story.
The story seems to have flown in under the radar today but no doubt it is also a big reason why stocks are up in Europe, particularly in Italy where the MIB is up around 3%. It's also a reminder that if the ECB act in March, we could get something that's not just the conventional move on rates but also widening the QE net once again into areas like these.
Buying or taking on bad bank debts isn't going to be an easy sell for Draghi to a lot of the governing council though.