Reuters: US Dollar Report: EU leaders seen discussing primary market support for Italy, Spain

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EU leaders seen discussing primary market support for Italy, Spain Jun 28th 2012, 13:34 BRUSSELS, June 28 | Thu Jun 28, 2012 9:34am EDT BRUSSELS, June 28 (Reuters) - European Union leaders are likely to discuss the possibility of the euro zone's bailout funds intervening to buy Spanish and Italian bonds as they are issued to help ease funding costs for Rome and Madrid, EU officials said on Thursday. The temporary European Financial Stability Facility (EFSF) and its replacement, the European Stability Mechanism (ESM), have a mandate to provide partial guarantees to government bonds sold at primary auctions, diminishing the risk for investors buying the paper. That power has not been used so far. "We've got to look at existing instruments and both the EFSF and the ESM, once it is active, have the capacity to buy bonds in the primary market," one EU official said as EU leaders gathered for their 20th summit since the debt crisis struck. "That's the area that makes sense to operate on," the official said. Details of what conditions countries such as Spain and Italy may have to meet in return still needed to be discussed, the official said. The Eurogroup Working Group of deputy finance ministers and treasury officials will meet at 1500 GMT on Thursday to discuss ways of lowering the dangerously high financing costs for Spain and Italy with existing instruments, one euro zone official said. According to existing rules, Madrid and Rome would need to request primary market assistance from the euro zone and agree to some conditions in a memorandum of understanding to get it. Another EU official said the conditionality could be light, asking for no more than the European Commission's country specific recommendations for EU members, approved by EU finance ministers last week, on structural reforms and lowering deficits. Link this Share this Digg this Email Reprints

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