ECB mulls caps on borrowing costs: report

THE European Central Bank is considering buying the bonds of crisis-wracked eurozone countries to ensure borrowing costs do not rise beyond a pre-determined level, German newsweekly Der Spiegel said yesterday.

The bank will define an upper limit for borrowing costs in countries such as Spain and Italy and intervene in the markets to ensure it is not breached, Spiegel said, without citing its sources.

Spain and Italy have seen their borrowing costs shoot up during the eurozone crisis to levels that forced Greece, Portugal and Ireland to seek a bailout.

At the end of trade on Friday, Spain was paying 6.39 per cent to borrow for 10 years and Italy 5.76 per cent.

In contrast, Germany was paying 1.49 per cent, as investors trust Europe's top economy to repay them.

The so-called spread, or difference, between benchmark German bonds and the debt-wracked countries would be decisive for the proposed rate cap, Spiegel said. AFP