Europe's leaders plan a week of intensive shuttle diplomacy to help defuse the continent's debt crisis, as Der Spiegel magazine reported that the European Central Bank is considering a plan to put a cap on bond yields.
As the debt crisis continues to threaten the global economy, French President Francois Hollande and German Chancellor Angela Merkel will meet in Berlin on Thursday. Greek Prime Minister Antonis Samaras will travel to the German capital the next day and to Paris on Saturday.
The talks come as the ECB fleshes out plans to curb the turmoil in European bond markets, a move that would give governments time to revamp their economies. The ECB's governing council may decide at its next meeting in early September to set yield limits on the debt of each country, German news magazine Der Spiegel reported Sunday, without saying where it got the information.
A cap "could be a major step to defuse tensions in the eurozone and buy time for the fiscal repair and pro-growth reforms to work," said Holger Schmieding, chief economist at Berenberg Bank in London. An ECB official declined to comment on the Spiegel report.
A plan to set a target on bond yields would involve the ECB using its power to print money, Spiegel said. The central bank would publish the volume of purchases for each country, the magazine said.
ECB President Mario Draghi is trying to overcome opposition from Germany's Bundesbank to a new bond-purchase plan, announced on Aug. 2. Draghi said any ECB bond-buying would work alongside euro-area bailout funds and only if countries applied for support and accepted strict conditions in return. Italy and Spain, the countries now at the heart of the crisis as borrowing costs soar, have yet to say whether they will request ECB help.
A successful ECB plan could also help shelter Spain and Italy from further turmoil from Greece as officials send mixed signals about their willingness to stump up more funds.
