–ECB To Buy Govt Bonds, Reopen Forex Swap Lines

BRUSSELS (MNI) – European Union finance ministers have agreed a
E720 billion deal and said the European Central Bank would intervene in
the government bond markets in a bid to shore up the Eurozone and stop
market attacks on heavily-indebted members of the currency club.

Alongside the establishment of an E720 billion fund — which can be
tapped in emergencies — the European Central Bank said it would
intervene directly in the secondary government bond markets and reopen
dollar-denominated foreign exchange swap lines with the US Federal
Reserve, the Bank of England, the Bank of Canada and the Swiss National
Bank.

Finance Ministers from the EU’s 27 member states thrashed out an
aid deal in a meeting late Sunday, which would see the European
Commission put up E60 billion, Eurozone countries E440 billion in
additional loans and the International Monetary Fund at least E220
billion, European Commissioner for Economic and Monetary Affairs, Olli
Rehn told reporters at a press conference early Monday, after the
meeting.

The agreement followed long negotiations in Brussels which began on
Sunday afternoon and was designed to stabilize markets ahead of their
Monday opening.

The rate for the loans — which the EU officials stressed had not
been requested — would be similar to the rate offered to Greece last
month, Rehn said.

“What emerges from today’s meeting of the Ecofin (council of
finance ministers), can be summarised as a consolidation pact,” Rehn
said, “which has…a full and strong commitment to intensify fiscal
consolidation from member states.”

He said heavily-indebted member states Spain and Portugal had
agreed to propose additional budget cutting measures ahead of the
council’s next meeting on May 18.

“All euro area member states are included in that E440 billion,”
Spanish finance minister, Elena Salgado told reporters. “The additional
amount we are talking about is up to a value of 440 billion euros. To
this amount a contribution of the IMF may be added. It is going to be
half of the contribution of the euro area, and that means an extra, up
to 220 billion euros, from the IMF,” she said.

The EU finance ministers’ meeting comes on the back of an EU
leaders summit in Brussels on Friday, at which the heads of state and
government asked the finance ministers to ready a European stabilisation
mechanism before markets open on Monday.

–Brussels: 0032 487 (0) 32 803 665, echarlton@marketnews.com

[TOPICS: MT$$$$,M$$FX$,M$$EC$,M$X$$$,M$$CR$,MGX$$$]