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Business

Alleged ECB bond-buying plans spark eurozone spat

A report in a German news magazine on alleged plans by the ECB to take up its bond-buying program again has triggered a fiery debate. The spat evolved even without official confirmation of such an ECB scheme.

The German government on Monday poured cold water on a reported plan by the European Central Bank (ECB) to set a cap on the alarmingly high borrowing costs of debt-stricken eurozone nations. Germany's weekly news magazine Der Spiegel had claimed the ECB was planning to intervene on financial markets to this end.

It once again alluded to ECB President Mario Draghi's earlier statements that his institution may buy bonds of struggling countries to keep yields on sovereign debt under control.

A spokesman for the German Finance Ministry, Martin Kotthaus, told reporters in Berlin he didn't know of any such plans, indicating that the ECB itself had dismissed the Spiegel report as being "absolutely misleading."

"Purely theoretically and speaking in the abstract, such an instrument would of course be very problematic, but I'm not aware of any plans in this direction," Kotthaus added.

Pre-decision rhetoric

Germany's central bank reiterated its all-out opposition to any new ECB bond-buying program. In its monthly report, the Bundesbank warned on Monday of the "substantial risks to the stability of the eurozone's financial system," should borrowing costs be stemmed by absorbing sovereign debt.

Italian Industry Minister Corrado Passera for his part sharply attacked the Bundesbank criticism of ECB bond market intervention plans, saying such comments disrupted markets.

"Such criticism of ECB plans for bond buying does not honor those who make them," Passera said. "There has recently been an excess of incoherent and disruptive communications which have disturbed markets." Italy would be one of the southern eurozone nations to profit from ECB intervention, as it has struggled with varying success to keep borrowing costs under control in recent months.

hg/msh (AFP, Reuters, dpa)