PARIS – The European Central Bank revealed Monday that it splashed out $32 billion last week – more than it has ever done before – propping up the bond markets of Italy and Spain.
News of the big bond purchases came a day before the leaders of Germany and France meet to discuss the debt crisis that has engulfed Europe for more than a year and a half. Speculation that German Chancellor Angela Merkel and French President Nicolas Sarkozy would be considering proposals for the eurozone to issue jointly guaranteed government debt appear to have been dashed, however.
Today’s meeting in Paris comes after a week of turmoil in financial markets, which was partly blamed on Europe’s sprawling government debt crisis, which threatened to sweep up economic heavyweights such as Italy and Spain. Fears that the eurozone’s third- and fourth-largest economies may find it too expensive to service their debts triggered the ECB’s intervention in the bond markets.
France itself was caught in the crossfire last week, with investors worrying about the financial health of the country’s banks and whether France would be the next country after the U.S. to lose its triple-A credit rating.
France and Germany, which together account for almost half of the eurozone’s economic output, are taking the lead in pushing for reforms aimed at pulling the bloc out of its debt crisis.
“That is and remains a path of consolidation, of reform, strict adherence to a reworked stability pact that also includes sanctions,” Merkel’s spokesman Steffen Seibert said.