ECB to buy eurozone bonds

Added by Nigel Shelbourne on August 7, 2011

The European Central Bank said on Sunday it will buy eurozone bonds following emergency talks about the debt crisis.

The ECB did specify the bonds it would buy, yet some analysts anticipate the bonds to be from Italy and Spain – countries with high debt.

Global stock markets plunged throughout last week as a result of the debt crises in the US and eurozone. Shares could plunge further unless leaders announce a decisive plan of action. Early signs of the uncertainty in global stock markets was exemplified on Sunday by the Tel Aviv stock market, which fell by more than 6%.

Monday will be the first day major markets are open following the decision by US-based credit rating agency Standard & Poor’s to downgrade the US AAA credit rating to AA+. S&P managing director John Chambers was quoted on Sunday stating that there is a one in three chance of a further downgrade within two years. The credit rating downgrade is seen as a major embarrassment for President Obama’s administration. It could also raise the cost of US government borrowing.

In related news, talks between finance ministers from the G7 group of developed countries were reported to be happening on Sunday at about 5pm, focusing on crafting a global response to the twin debt crises.

Selected S&P Ratings:

• AAA: UK, France, Germany, Canada, Australia
• AA+: USA, Belgium, New Zealand
• AA: Spain, Bermuda
• AA-: Japan, China
• A+: Italy, Chile, Slovakia
• BBB-: Portugal, Iceland, Morocco