Merkel: No plans for bailout funds to buy bonds

German Chancellor Angela Merkel said Wednesday there were "no concrete plans" for the EU bailout funds to buy the bonds of struggling countries to drive down their borrowing costs.

While it is "one of the options" of the bailout funds to buy bonds, "there are no concrete plans" to do so, Merkel told reporters after talks with her Dutch counterpart Mark Rutte here.

"There are no concrete plans that I know of but there is the possibility in the EFSF and the ESM to buy bonds on the secondary market, bound up of course always with conditions," Merkel said.

"But that is a purely theoretical comment about the contractual situation," she stressed.

"This is not a subject for debate right now."

According to media reports, Italian Prime Minister Mario Monti said EU leaders were considering using the bloc's bailout funds to buy bonds of struggling countries in a bid to pull down high borrowing costs.

Spain in particular is struggling with record debt borrowing levels, after a recent emergency bailout for its struggling banks failed to reassure investors.

A spokesman for the German government told a news conference earlier Wednesday that the terms of the funds, the EFSF and the ESM, already allowed for buying bonds and that such purchases were attached to conditions.

The ESM is a permanent fund worth 500 billion euros set up to replace the EFSF that was established to come to the aid of debt-wracked eurozone countries.

It is due to come into force in July and the two funds are due to run in parallel until the middle of next year.

Earlier Wednesday, the European Commission dubbed the idea "financial paracetamol".

Amadeu Altafaj, spokesman for the EU's eurozone commissioner Olli Rehn, said: "It could soothe tension, pain and malaise... but it does not heal the root causes, the structural problems of the economies of Italy, Spain and others."

In other comments, Merkel backed Spain that is preparing to request formally funds to recapitalise its banks that have been particularly hard hit by the crisis.

"It is important and right that Spain will in the next few days apply for aid that is specifically for the problems in their banks," she said.

"Banks must be recapitalised. Banks must be allowed to work so that economic growth can occur and therefore, we support this application that Spain will put in," added the chancellor.

And ahead of a crunch EU summit next week, Merkel reiterated her vision of a "political union" in Europe, with states giving up more sovereignty to a centralised body and deeper cooperation between countries.

She also repeated her congratulations to new Greek Prime Minister Antonis Samaras, sworn in earlier Wednesday, adding she would "be delighted" if he joined her at the Germany-Greece European Championship quarter final clash in Gdansk, Poland.

"For my part, I would be delighted if he came to Gdansk. If he can do that, he must say himself, I cannot speak for him. In any case, it will be a good sporting occasion and, I hope, a very fair sporting event," said Merkel.