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The European Central Bank will set a limit on the spread on yields that will activate the new instrument – monetary policy

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The President of the European Central Bank indicated that the new “mysterious” anti-crisis tool of the European Central Bank (ECB) will be activated if the spread (the spread) between the interest rates on the sovereign debts of the various countries of the bloc exceeds certain limits. Christine Lagarde, for finance ministers during Thursday’s meeting in Luxembourg, Bloomberg advances.

According to the news agency, which cites people familiar with the matter, Lagarde explained to ministers that the new instrument is being designed with the aim of preventing irrational market movements from putting pressure on some of the countries that make up the eurozone.

According to the same sources, the President of the European Central Bank revealed the possibility of activating the new instrument if the spreads of sovereign debt yields of different countries exceed certain limits or if market movements exceed a certain speed. Lagarde has not specified, however, whether these limits will be made public. So far, many economists and analysts point out that the European Central Bank has decided that the “spread” between Italy and Germany’s 10-year debt cannot exceed 250 basis points. From this point, they say, the European Central Bank will intervene in the market. The emergency meeting of the ECB Board of Directors took place on Wednesday at a time when the spread between Italy and Germany was very close to 250 points.

After Wednesday’s meeting, Lagarde stressed that the new instrument aims to avoid “fragmentation” – when the costs of financing the weaker economies in the eurozone are significantly higher than those of the stronger economies.

This Thursday, the spread between Germany’s yields and Italy narrowed by 13.7 basis points, with Italian 10-year interest rates down 6.5 points while “bond” rates rose 7.2 points. The spread between the debt yields of these two countries is now 202.8 points.

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