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The European Central Bank is likely to attach some loose conditions to an upcoming scheme designed to cap borrowing costs for the euro zone’s most indebted states in a bid to win support for it, sources told Reuters.
Sources close to the matter said the scheme would likely have conditions, such as that countries comply with the European Commission’s economic recommendations.
These are issued annually by the European Commission and typically address a country’s structural issues, such as its labour market or pension system.
The sources said the ECB will spell out that the scheme’s goal is simply keep bond spreads in line with their economic fundamentals, rather than bringing them to near-zero like they were before a crisis of confidence a decade ago.
This will likely be achieved through quantitative benchmarks, such as historical spreads, which may then be turned into a “traffic light” system to instruct staff on which country’s bonds to buy and at which frequency, the sources said.
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