ECB to debate whether to buy Italian bonds

The European Central Bank will decide later on Sunday whether to buy Italian bonds to try and prevent the euro zone debt crisis from widening, while global policymakers conferred on the twin financial crises in Europe and the United States.

After a week that saw $2.5 trillion wiped off world stock markets, political leaders are under searing pressure to reassure investors that Western governments have both the will and ability to reduce their huge and growing public debt loads.

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 ECB source said.

The source said that if the ECB council opted to intervene on Italy at a crucial conference call starting at 1700 GMT, the ECB and national banks would start buying Italian bonds when markets open on Monday.

That would likely prompt a sizeable relief rally on global markets. If it does not act, the reverse would be true.

Another source said the council would look too at possible emergency liquidity measures to prevent money markets freezing.

The fourth anniversary of the global credit crunch which usheredin the financial crisis looms this week.

A third ECB source said the teleconference had been put back into the evening to see what measures the United States was ready to take to calm markets after credit ratings agency Standard

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