European Central Bank (ECB) is negotiating with the International Monetary Fund (IMF) a financial assistance package for Spain, worth about €300 billion ($387 billion), the Dutch financial newspaper ‘Het Financieele Dagblad’ announced Friday, without its source of information, writes Reuters.
The financial assistance package will prepare ECB’s decision to buy Spanish government bonds to reduce the financing costs of Spain, after the Governing Council of ECB created a new bond purchase program, called “Outright Monetary Transactions” (OMT), which will replace the previous program and will help ECB to buy unlimited bonds with maturities between one and three years. The Dutch newspaper claims that the ECB wants to get the participation of IMF financial assistance, to ensure that Spain will be imposed strict conditions on reducing costs and reforming the economy.
“ECB is working on the new framework of government bond purchase program and this involves close monitoring from IMF,” said a source for ‘Het Financieele Dagblad’. IMF will set the conditions for granting the financial assistance package and the program will be similar to those held by the IMF, with a duration of three years. The maximum amount awarded is €300 billion, said the Dutch newspaper, adding that the financial aid will be discussed during the meeting of eurozone finance ministers taking place today in Cyprus.
Countries that want ECB to buy bonds from them will have to accept certain conditions that will be partially monitored by the IMF, said the head of the ECB, Mario Draghi, adding that the acquisition will not result in printing additional money for the 17 eurozone countries. Draghi gave assurances that the ECB will help only the countries that accept and implement the strict conditions. “In addition to economic growth, the only option to consider is using the mechanism announced by the ECB. We will not request a complete package of financial assistance,” said Wednesday Spanish Prime Minister, Mariano Rajoy.
Last week, yields of Spanish government bonds continued to decline after ECB has adopted the unlimited purchase program for bonds in order to alleviate the pressure on the euro area countries that are facing financial problems.
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