European Central Bank President Mario Draghi will hold talks with Bundesbank President Jens Weidmann in the coming days in an effort to overcome the biggest stumbling block to a new raft of measures including bond purchases, two central bank officials said.
Having secured the backing of governments in Spain, France and Germany, Draghi is now seeking to win over ECB policy makers for a multi-pronged approach to reduce bond yields in countries such as Spain and Italy, the officials said late yesterday on condition of anonymity because the talks are private.
Draghiâ€™s proposal involves Europeâ€™s rescue funds buying government bonds on the primary market, flanked by ECB purchases on the secondary market to ensure transmission of its record-low interest rates, the officials said. Further ECB rate cuts and long-term loans to banks are also up for discussion, one of the officials said.
The euro strengthened and U.S. stocks rallied, with the Dow Jones Industrial Average climbing above 13,000 for the first time since May.
Draghi is trying to put together a game changer in the battle against the sovereign debt crisis, and winning Weidmannâ€™s support would enable him to present a united front to financial markets. Draghi flagged the intervention on July 26, saying the ECB will do whatever it takes to preserve the euro. The Bundesbank responded yesterday by reiterating its opposition to ECB bond purchases.
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