Reaffirming their determination to save the Euro Zone from the current crisis, the German Chancellor, Ms Angela Merkel, and the French President, Mr Francois Hollande, have said other EU member nations and institutions must fulfil their obligations in this regard.

“Germany and France are committed to the integrity of the Euro Zone. They are determined to do everything to protect the Euro Zone,” the two leaders said in a joint statement after a conference call yesterday.

The EU member-nations as well as the European institutions “must fulfil their obligations in their areas of competence”, they said.

The two leaders echoed the remarks made by the European Central Bank President, Mr Mario Draghi, on Thursday.

Addressing the Global Investment Conference in London, Mr Draghi had said: “Within our mandate, the ECB is ready to do whatever it takes to preserve the euro. And believe me it will be enough.’’

Market experts felt Mr Draghi’s remarks were an indication that the ECB may be planning to resume its programme of buying sovereign bonds to stem a sharp increase in the borrowing costs of debt-laden nations such as Spain and Italy.

The bond-buying scheme — Securities Markets Programme — allows the ECB to buy government bonds from banks and other financial institutions from member countries.

This is aimed at pushing down the borrowing costs and enable cash-strapped Euro Zone nations to raise funds from the capital markets at much lower costs.

European shares rallied following Mr Draghi’s remarks and Spain’s borrowing costs for 10-year bonds dropped to 6.8 per cent from 7.6 per cent, regarded as unsustainable in the long-term.

Greece, Ireland and Portugal were forced to seek a bailout from the EU and the International Monetary fund when their borrowing costs rose to this level.

Since the beginning of the SMP two years ago, the ECB bought bonds worth €211 billion through banks and other financial institutions. But critics say this practice is a form of state financing by the ECB, which is not allowed under the EU rules.

Germany and France “underlined the necessity to speedily implement the decisions of the EU summit in Brussels on June 28 and 29”, the statement said.

A German Finance Ministry spokesman said the Finance Minister, Mr Wolfgang Scheuble, welcomed the initiative by Mr Draghi.

(This article was published on July 28, 2012)
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