The European Central Bank is considering buying Italian government bonds to support the euro zone's third largest economy and keep markets at bay until the currency bloc's own rescue fund can take over. ECB sources said the central bank will decide whether to buy Italian bonds to try to stem the euro zone's debt crisis from widening in a conference call which began at 1700 GMT, Reuters reported. As central bankers conferred, Germany and France released a statement that said the euro zone's bailout fund would soon be able to buy government bonds of debt strugglers Italy, Spain, Greece, Portugal and Ireland. ECB President Jean-Claude Trichet wants the policy-setting Governing Council to take a final decision on buying Italian paper after Prime Minister Silvio Berlusconi announced new measures on Friday to speed up deficit reduction and hasten economic reforms, one source said. The Eurosystem comprises the ECB and national central banks of the 17 countries that share the euro single currency. German Chancellor Angela Merkel and French President Nicolas Sarkozy said they were committed to getting approval from their parliaments for new powers for the European Financial Stability Facility rescue fund by the end of September. That will allow the EFSF to buy government bonds in the secondary market if the ECB thinks it is warranted and if euro zone member states agree, potentially absolving the ECB of the need to do so directly, something some of its members are strongly opposed to. "France and Germany are confident that the ECB analysis will provide the appropriate basis for secondary market interventions as it will help determine the case when financial stability of the euro zone as a whole is at risk," the leaders said. Their statement reiterated the agreement at last month's emergency euro zone summit which granted a second bailout to Greece, but the focus on the EFSF's ability to buy government bonds once the bloc's parliaments have ratified its new powers could act as an encouragement to the ECB to do the same in the interim. Twin debt crises in Europe and the United States are causing global market turmoil and stoking fears of the rich world sliding back into recession. -- SPA
