Draghi to meet Bundesbank head on bond purchases

BRUSSELS — European Central Bank (ECB) president Mario Draghi will hold talks with Bundesbank president Jens Weidmann in the coming days in an effort to overcome the biggest stumbling block to a new raft of measures including bond purchases, central bank officials said on Saturday.

Having secured the backing of governments in Spain, France and Germany, Mr Draghi is now seeking to win over ECB policy makers for a multipronged approach to reduce bond yields in countries such as Spain and Italy, the officials said.

Mr Draghi’s proposal involves Europe’s rescue funds buying government bonds on the primary market, flanked by ECB purchases on the secondary market to ensure transmission of its record-low interest rates. Further ECB rate cuts and long-term loans to banks are also up for discussion.

Mr Draghi is trying to put together a game changer in the battle against the sovereign debt crisis, and winning Mr Weidmann’s support would enable him to present a united front to markets. Mr Draghi flagged the intervention on July 26, saying the ECB will do whatever it takes to preserve the euro. The Bundesbank responded on Satur- day by repeating its opposition to ECB bond purchases.

Mr Draghi will speak with Mr Weidmann before the ECB’s governing council convenes in Frankfurt on Thursday, the officials said. He has also reached out to other ECB policy makers in an effort to build consensus, they said.

An ECB spokeswoman said it was usual practice and nothing special for Mr Draghi to meet members of the governing council. She declined to comment on the content of any talks. They will take place against a backdrop of international financial diplomacy, with US Treasury Secretary Timothy Geithner and German Finance Minister Wolfgang Schäuble scheduled to meet today on the North Sea island of Sylt. Mr Geithner is scheduled to meet Mr Draghi later today in Frankfurt, the US Treasury said.

Mr Draghi has already secured the endorsements of Germany and France for a plan to reduce bond yields in Spain and Italy.

German Chancellor Angela Merkel and French President Francois Hollande echoed Mr Draghi’s language after a telephone conversation yesterday, pledging to do everything to protect the single currency. Bloomberg