ECB policymakers weighing up details of upcoming bond-buying scheme

SINTRA, Portugal Reuters -- European Central Bank policymakers are weighing up whether or not they should announce the size and duration of their upcoming bond-buying scheme that will curb financing costs for Italy and other debt-laden countries.

The European Central Bank is going to announce its new tool on July 21, along with its first interest rate hike in more than a decade, in response to a surge in bond yields that have hit the most indebted countries hardest.

According to conversations with half a dozen policymakers at the annual forum of the European Central Bank in Sintra, Portugal, the ECB staff is working on different options for policymakers, including how many of its details, such as firepower and duration, should be made public.

The sources said that a large envelope would include the promise to put investors' minds at rest about the ECB's commitment to fight financial fragmentation in the euro zone.

They said that the ECB would be on the safe side in the unlikely event of it being accused by the courts of bankrolling governments because it would show that its intervention is contingent and does not equate to a blank cheque for states.

The option could be a disaster if the number is seen as too small by bond traders, according to the sources. They said that keeping the July announcement vague would avoid this risk, but it might leave too many questions unanswered.

Policymakers agree that they should exercise judgment on when to intervene and in which markets, rather than set numerical goals.

They also agreed that the programme should come with conditions, such as complying with the European Commission's recommendations, but these shouldn't be so burdensome, as reported by Reuters earlier this month.

An ECB spokesman wouldn't say anything about this story.

ECB President Christine Lagarde said on Tuesday that the new tool would be effective proportionate and containing sufficient safeguards to preserve the impetus of member states towards a sound fiscal policy. The European Central Bank has been taken to Germany's top court and the European Court of Justice over its previous bond buying scheme by German academics who accused it of financing governments that are not allowed by European treaties.

The courts said the ECB acted within its mandate as long as safeguards were in place.