German Chancellor Angela Merkel said on Monday the European Central Bank would not raise money supply to buy state bonds as part of a global emergency package to stabilise the common European currency.
A money supply boost will thus not be part of the plan agreed by EU finance ministers early on Monday to provide standby funds and loan guarantees to prevent Greece's debt crisis spreading to other euro zone states.
"Additional money supply will not be created to buy government bonds, rather money supply will be kept within limits existing today," she said at a news briefing in Berlin.
The rescue package, which along with IMF funding is worth about 750 billion euros ($1 trillion), can be tapped by euro zone governments struggling to obtain credit, and includes central bank liquidity measures and bond purchases to steady markets.
It is the biggest support package since G20 leaders threw money at the global economy after the collapse of Lehman Brothers in 2008, and has triggered the strongest one-day rise in European shares in 17 months after panic selling last week.
ECB President Jean-Claude Trichet said it seemed observers had understood the importance of the ECB's move, after the euro rallied above $1.30 and European shares shot up six percent, while the premium investors demand to hold Greek government bonds plummeted by nearly 600 basis points.
Merkel, who for months resisted pressure to aid Athens over a debt crisis that sent market tremors around the globe, said the measures were necessary to guarantee the future of the euro.
She has repeatedly called for new global regulations to curb market speculation and certain derivatives trading, and on Monday reiterated that measures must also be taken in the United States, also a source of speculation against the euro.
"It is also imperative that the financial market regulation project presented by (U.S.) President Obama is agreed by the U.S. Senate so that we may come closer to our goal," she said.
The Obama administration favours requiring most credit default swaps and other over-the-counter derivatives to be cleared by a central clearing house, which would assume the risk if one party defaults. But legislation is stalled in the Senate and it is unclear when a final bill will pass.
ReutersLast Mod: 10 Mayıs 2010, 23:46