HELSINKI (Reuters) - Finnish Prime Minister Jyrki Katainen said on Wednesday he was not sure if the European Central Bank’s bond-buying plan would help lower the bond yields of troubled euro countries in the long term.
“It (the announcement of the ECB plan) has led to a positive situation, but I’m not fully sure if it will help in the long run,” Katainen told reporters.
Financial markets rallied after the ECB this month committed to buy bonds of struggling euro zone countries if their governments request help first and have piled pressure on Spain to request aid and trigger the bond-buying program.
Katainen, however, said markets had not given Spain enough credit for its reforms and that the high yields did not reflect the country’s improved competitiveness.
“The problem is that whatever the countries do, the interest rates do not necessarily follow, as the markets do not analyze each country’s own action but they are afraid of a domino effect,” Katainen said.
He said there was a need for additional measures such as covered bonds, which he proposed at a European Union summit in June, adding that European leaders were discussing different solutions.
“We need some common road signs, not necessarily joint liability, but a solution where the markets would have more time to evaluate what Spain has truly done,” Katainen said.
Reporting By Jussi Rosendahl; Editing by Toby Chopra and Susan Fenton