ECB measures ease pressure on Spanish debt

Steps taken by the European Central Bank (ECB) to ease the market pressure on Italy and Spain's public debt appear to have been successful. Despite the ECB measures being temporary in nature, and not designed to address the root of the two countries' problems, action taken by the organism, headed up by Jean-Claude Trichet, saw yields on bonds issued by Madrid and Rome fall for the second day running on Tuesday.

For the first time in nine months the yield on Spanish 10-year bonds fell to a level of five percent yesterday. That took it out of what analysts had been describing as the danger zone, where yields were located last week when they hit highs of 6.44 percent.

The ECB announced on Sunday that it would begin buying up Spanish and Italian bonds in an attempt to keep the cost of borrowing down for the Mediterranean countries, which are fighting to stave off a Greek-style rescue. The effect was notable on Tuesday morning in the secondary markets, where bonds issued by both countries are resold.

"We have seen several requests for information [from the ECB] and we have been negotiating with them," an operator told Reuters on Tuesday.

Meanwhile, Economy Minister Elena Salgado insisted once again on Tuesday that Spain was not in need of a bailout, citing figures showing that Spain's total debt is 20 percentage points below the EU average.

"Spain is far from needing a rescue," she said Tuesday. "There is, however, instability in the debt markets."

Trichet: speedier reforms needed

But that instability was somewhat quelled on Tuesday, with yields on Spanish 10-year bonds below 5 percent for the first time since the end of November 2010 and Italian bonds hovering just above 5 percent, their lowest level in a month.

The president of the ECB, Jean-Claude Trichet, held a series of interviews on Tuesday with European media outlets, in which he confirmed that the bank is "in the secondary market." He went on to guarantee that the institution would continue with these purchases for now.

He made clear, however, that this temporary lifejacket for the peripheral EU countries should not be used as an excuse for governments to fail to come good on the promises they made regarding reforms on July 21. He also said that it was the responsibility of euro-zone governments to deal with the debt crisis, and not that of the central bank.

Speaking to French broadcaster Europe 1, Trichet called on European governments- in particular those of Italy and Spain- to "do their jobs responsibly."

The ECB president went on to say that the crisis that has swept through the markets "could have been the most serious since World War II, if those in power had not taken some important decisions."

He stressed the importance of governments "putting the measures adopted on July 21 into practice as soon as possible," in reference to a meeting last month that saw the euro-zone countries agree on a second bailout package for crisis-stricken Greece and to make the European Financial Stability Facility (EFSF) more flexible.

Trichet added that "the decisions taken at that moment" should be speeded up. "In general terms we have a problem of confidence in the international economy," the ECB president continued, given that "for the last four years we have gone through a period of tension, which began on August 9, 2007."

During another interview, this time for German television, Trichet defended the decision of the ECB to buy up Italian and Spanish sovereign debt.

"We have seen that the decisions we took in the euro zone did not have the effect that we expected," he said. "That is why we have decided to veer from our monetary policy rules."