ECB unveils unlimited bond purchase plan to save the euro
07 Sep 2012
The European Central Bank (ECB) has launched a massive plan to rescue the European financial system amid reports of a slowing down in the global economy due to eurozone debt crisis.
The ECB said that it will resort to unlimited sovereign bond purchases to bring down the cost of borrowing of struggling eurozone nations.
The plan, known as outright money transactions (OMTs) in the secondary bond markets, is designed to preserve the singleness of the monetary policy and to ensure the proper transmission of ECB's policy stance throughout the area, an ECB statement said.
ECB president Mario Draghi said, ''OMTs will enable us to address severe distortions in government bond markets, which originate from, in particular, unfounded fears on the part of investors of the reversibility of the euro.''
Financial markets around the world gave a rousing welcome to the ECB move yesterday. The German stock index DAX surged 2.8 per cent while France's CAC40 was up 3 per cent. The UK's FTSE100 climbed 2.1 per cent and the European blue chip index STOXX50 shot up 3.4 per cent in yesterday's trading.
In the US, the Dow Jones moved up 1.9 per cent while the broader S&P 500 surged 2 per cent.
