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Reports from Bloomberg that European Central Bank President Mario Draghi and Bundesbank President Jens Weidmann will meet to discuss new crisis-averting measures by the ECB suggest that rumours of new intervention are indeed real.Investors began speculating that Draghi was likely to restart a controversial bond-buying program and/or offer a new very long-term refinancing operation that would relieve upward pressure on Spanish and Italian borrowing costs.
Earlier today, French newspaper Le Monde reported that the ECB was already preparing to start bond purchases, although the nature of the program and its implementation date remain unclear.
Those followed statements from the Bundesbank, which explicitly ruled out more ECB bond-buying. He said that the Bundesbank would support bond buying by the EFSF (Europe’s current bailout fund) but given many national leaders’ refusals to do this, such a plan would pose obvious problems.
It’s becoming clear that Draghi and Weidmann disagree on what to do next and when to do it, unsurprising since Weidmann has strongly resisted activist measures in the past. If past spats between the ECB and Bundesbank are any indication, then Draghi will probably win out.
This report has sent markets soaring higher. We’ll see how long this rumour lasts.