German central bank says buying EU government bonds
Germany's central bank, the Bundesbank, has begun buying European government bonds, a spokesman told AFP on Monday, without giving further details.
The announcement follows a statement by the European Central Bank that it would buy eurozone public debt as part of a rescue plan for the 16-nation eurozone.
Major global central banks including the ECB announced overnight a series of concerted measures aimed at calming financial markets and ensuring eurozone stability.
The purchase of government debt by eurozone central banks is the most spectacular of the ECB's moves and breaks a key taboo for the first time in its 11-year history.
The initial cause for eurozone concern is Greece, which must refinance billions of euros in government debt this month, but fears have now spread to include Portugal and Spain as well, with still others in the background.
The European Union and International Monetary Fund agreed early Monday on a plan worth up to 750 billion euros (one trillion dollars) to support troubled economies.
"This package serves to strengthen and protect the common currency," German Chancellor Angela Merkel said hours after the EU announced the unprecedented intervention along with central banks worldwide.
"We are protecting our currency in an extraordinary situation," she added.
While markets appeared to be impressed by massive firepower now being aimed at the eurozone crisis, the decision to buy government debt raises the issue of central bank independence, a critical factor in the ECB's credibility.
© 2010 AFP