ECB Spends $32 billion to Back Italy, Spain

Posted August 15th, 2011 at 3:15 pm (UTC-5)
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The European Central Bank says it spent almost $32 billion on government debt last week to prop up the bond markets of Spain and Italy.

The news comes just one day before the leaders of Germany and France meet in Paris to discuss the debt crisis sweeping the 17-nation eurozone. Both German Chancellor Angela Merkel and French President Nicolas Sarkozy said the topic of collectively issuing so-called “Eurobonds” to guarantee the eurozone debt would not be on the agenda.

Critics of eurobonds worry that such a step would reduce the incentive for weaker eurozone economies like Greece to reform their economies, and that the shared interest burdens would punish financially sound countries. Ms. Merkel and Mr. Sarkozy are instead expected to discuss improving economic governance.

With Europe continuing to seek measures to satisfy the financial markets, the European Central Bank has been taking a more central position in dealing with the crisis, which has already led to massive bailouts for Greece, Ireland and Portugal.