European markets rallied Friday amid renewed investor confidence in the European Central Bank's (ECB) determination to bring to an end the region's long-running debt crisis.
The euro and European stocks were ending the week higher after pulling back from the steep falls they posted just one day earlier, when the failure of the ECB to take immediate action to deal with the eurozone debt crisis led to disappointment among investors.
But traders said investors had now begun to focus on the ECB's new plan for bringing the long-running crisis to an end, which ECB chief Mario Draghi had outlined at his press conference on Thursday.
As the trading week came to an end the blue-chip Eurostoxx 50 had surged 3.3 per cent to 2338, with the positive mood prevailing on European share markets also helped by the release of a stronger-than-forecast US monthly jobs report. The euro jumped 0.7 percent to $1.2274.
Stock markets in nations at the centre of the debt crisis - Italy and Spain - posted even bigger gains with shares in Milan racing ahead by 5 percent and by 4.19 percent in Madrid.
Still, Spain's borrowing costs remained under pressure Friday after they jumped on Thursday when it became clear that the ECB was not planning to step immediately back into the market to buy Spanish bonds.
Madrid had pinned its hopes on the ECB massively buying Spanish debt in order to calm financial markets.
But under the plan outlined by Draghi on Thursday, the ECB will only be prepared to buy government bonds from financially troubled nations once their governments agree to sign up to the strict conditions laid down by the euro bailout funds - the European Financial Stability Facility (EFSF) and the European Stability Mechanism (ESM).
Several Spanish newspapers described his plan as a "cold shower." Draghi had "kicked the euro in the backside of Spain and Italy," opposition leader Alfredo Perez Rubalcaba said.
The ECB was pushing Spain to seek another financial rescue, after the eurozone pledged up to 100 billion euros for its troubled banks, daily El Pais said.
But many European analysts see Draghi as walking a thin line between continuing to force governments to press on with reforming their state finances and shoring up the eurozone in what is biggest crisis since it was forged 13 years ago.
"(The ECB) firmly kicked the ball into the governments' camp by saying that it was ready to conduct open market operations once the EFSF/ESM have been activated on the request of the country aiming to secure support," said Morgan Stanley economist Elga Bartsch.
Speaking on Friday, Spanish Prime Minister Mariano Rajoy said Madrid would decide whether to seek help from eurozone rescue funds after the ECB reveals what kind of measures it is planning.
The government wanted to know whether the "unconventional measures" planned by the ECB were "adequate," the premier said.
Rajoy's comments came after representatives of his conservative People's Party (PP) denied that Spain needed a rescue. Rajoy himself had refused on Thursday to say whether Madrid was planning to seek aid from the eurozone rescue funds.
But many analysts in Madrid saw Spain as having little choice. Spain is already toeing the austerity line recommended by the European Union.
Under a possible bailout, Spain would face stricter deadlines and EU supervision, the economic daily Expansion wrote. That would strip Madrid of the little financial independence that it still has left, commentators said.
Draghi had bent to the will of Germany, which is concerned that an intervention by the ECB would allow Spain or Italy to forgo economic reforms, several editorialists wrote.
Market sentiment seemed to be much more positive about Italy, the eurozone member that is seen as next in line after Spain in the list of countries that might need a bailout.
Risk differentials between the country's 10-year bonds and equivalent German paper, which serves as the benchmark in the eurozone, was below the critical 5-percentage-point mark. At the close of markets on Thursday, the spread stood at 5.05.
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