Mario Draghi plans a bond buying program

Mario Draghi, president of the European Central Bank plans a bond buying program but the German bank Bundesbank is against the idea.

Draghi concentrates on a bond buying program for Italy and Spain but Bundesbank is not in favour of it. The bank sees significant risks concerning this program and is in the opinion that European governments, not central banks should conduct sovereign bailouts.

The European Central Bank plans to set yield caps on Italian and Spanish bonds which unfortunately led to a fall in the two countries’ interest rates.

Mario Draghi’s plan is to buy bonds from countries that have already asked for help from the European bailout fund.

The talks will take place on August 23^rd in Germany, Berlin. There are about to gather the Greek Prime Minister Antonis Samaras, Angela Merkel and Fancois Hollande.  There is significant pressure exerted on Greece and it plans to ask for about 2 years more in order to meet its goals concerning austerity.

The ETF of iShares MSCI Germany Index has declined 0.3 per cent, 1.6 per cent for iShares MSCI Italy ETF and 1.4 per cent for IShares Spain ETF. The Eurodollar went 0.04% up this week.

The European Central Banks’ bond buying program is the solution for this situation.  If it succeeds, a global financial rally will occur. But if it does not, we can expect lower prices and more volatility.