• Home
• /
• Markets

Europe bides time on Spain, relies on ECB’s bond-buying

NICOSIA — European governments put off decisions on aid for Spain and a loosening of Greece’s loan terms, counting on the European Central Bank’s bond-buying pledges to provide interim relief from market turmoil.

Finance ministers meeting in Cyprus looked to a fresh set of reforms to rebuild confidence in Spain’s economic management and said the fate of Greece’s €240 billion rescue programme won’t be decided until late October, possibly at a crisis summit of leaders.

“The amount of time that we have — it’s a very difficult question to answer,” ECB President Mario Draghi told reporters on Friday after meeting the euro-region ministers in Nicosia, the Cypriot capital. “You have to ask the markets. If we continue going this way, then one has to be very optimistic.”

The euro rose as much as one per cent $1.3121, the highest since May 4. Spain’s extra 10-year borrowing cost over German levels narrowed by three basis points to 404 basis points. Financial markets continued to draw strength from the ECB’s September 6 offer to go on a bond-buying mission, and a September 12 ruling by Germany’s constitutional court that cleared the way for the setup of a €500 billion permanent bailout fund, known as the European Stability Mechanism.

Finance ministers will inaugurate the ESM on October 8 and pay in the first two equity of €32 billion by the end of October, making the fund “fully operational,” Luxembourg Prime Minister Jean-Claude Juncker said after chairing Friday’s meeting.

“There is no more room for complacency today than there was six months ago but we are, I believe, moving into the right direction,” European Union Economic and Monetary Commissioner Olli Rehn said.