BBC News - France to fall back into recession says central bank

France's economy will fall back into recession this quarter, the country's central bank has predicted.

The Bank of France estimates that the economy will contract by 0.1% in July to September. It has already predicted a fall of the same level for April to June.

France posted zero growth in the first quarter of the year.

France's economy has been hit by the eurozone debt crisis, which has weakened demand for its exports.

The debt woes of fellow eurozone nations, such as Greece, Spain and Portugal, have also knocked French business and consumer confidence.

If France does fall back into recession, it will be for the second time in three years. It last returned to economic growth in the spring of 2009

The eurozone crisis has hit French exports

BBC News - Olympic success: How much does a gold medal cost?

By Richard AndersonBusiness reporter, BBC News

How much does an Olympic gold medal cost? With a minimum six grams of gold and a large chunk of silver, the pithy answer is about £450.

The Great British team is on course for its best performance since the first London Olympics in 1908

But as Britain basks in the glory of what is shaping up to be the most triumphant Olympics for Team GB in more than 100 years, it is worth reflecting for a moment on the reasons behind the success.

Talent, punishing training regimes, pride in a home games and fervent support have of course played a key part in so many record-breaking performances.

But, in the end, as cynical and unpalatable as it may sound, the main reason behind the team's overall success is cold, hard cash.

Medal bonanza

In the Atlanta Games in 1996, the British team won a grand total of one gold medal, and 15 in all.

The following year, National Lottery funding was injected directly into elite Olympic sports for the first time.

The return was instant. In the Sydney Games of 2000, the British team won 11 golds - the first time Britain won more than 10 golds since the Antwerp Games in 1920 - and 28 medals in total.

Athens in 2004 saw a similar return, the last games before the Olympic Committee awarded the 2012 games to London.

Investment in Olympic sports in the UK immediately rocketed in preparation for the country's first games since 1948, and again the return was both immediate and spectacular - the British team won 19 golds and 47 medals in total in Beijing in 2008.

"When Great Britain went to Beijing, the team benefited from £235m investment in training programmes in the years running up to the Olympics - that's a fourfold increase on what was spent [in the run up to Athens]," says Prof David Forrest, a sports economist at the University of Salford.

"We spent an extra £165m and got 17 more medals, so that's about £10m a medal."

'Big impact'

This massive increase in investment in elite sports was funded in large part by the National Lottery.

"Lottery funding in the 90s has a lot to do with [Great Britain's recent success]," says Stefan Szymanski, professor of sports management at the University of Michigan.

"That devotion of financial resources, particularly on building up elite teams, has had a big effect on Britain."

In fact, the Lottery accounts for about 60% of funding for GB's Olympic teams' preparation for the London Games. Almost 40% comes directly from the UK exchequer - in other words, directly from our pockets via taxes.

This equates to about 80p a year per UK taxpayer. About £7m also comes from money raised by Team 2012, mainly through corporate sponsors.

Just how big an impact all this money has had becomes even clearer when you look at individual sports.

In Beijing, the most successful sports were those that received the most funding. Between them, athletics, cycling, rowing, sailing and swimming accounted for half of all Olympic team funding. They also accounted for 36 of the 47 medals won.

The same pattern can be seen in the current Olympics - almost half of all funding went to these five sports and, so far, together they have won 27 out the 40 medals won.

Of course, there is a chicken and egg element here, as funding is rewarded on the basis of success.

Once the pattern in established, however, it is hard to break, as the more successful sports get more money, allowing them to become even more successful.

Closed sports

In fact, there are some sports that are in effect closed to all but the most wealthy nations.

"We have identified four sports where there is virtually no chance that anyone from a poor country can win a medal - equestrian, sailing, cycling and swimming," says Prof Forrest.

He points to a study suggesting there is one swimming pool for every six million people in Ethiopia.

Wrestling, judo, weightlifting and gymnastics, he says, tend to be the best sports for developing nations.

For the majority of other disciplines, money is key.

According to Prof Szymanski, 15% of all Olympic medals ever awarded have been won by the US, with European countries accounting for 60%.

"These are two very rich and relatively highly populated regions. The combination of these two is probably what goes to producing Olympic medals over the long term," he says.

'Real difference'

Australians are certainly starting to question the role of money in their team's relatively poor performances in London - at time of writing, the country is lying 24th in the medals table, with just one gold.

Kevan Gosper, Australian member of the International Olympic Committee, can see one very obvious reason.

"We've been down on the sort of financial support that we were accustomed to when compared with the financial support that's coming through from other countries, particularly here in Europe," he told Australia's ABC radio during an interview from London.

"That really cost us... the money is the difference between silver and gold."

For other countries, it's the difference between finishing on the podium and finishing nowhere.

"If you start thinking of [the games] in terms of 'how has my country performed relative to others', then you can get rather cynical, because the shape of the medals table is driven mainly by just how rich a country is," says Prof Forrest.

But with Team GB's haul so far costing each UK taxpayer less than 10p a medal, you won't find too many Britons complaining. Add in a conservative £12bn cost of hosting the games at £400 per taxpayer, and some may not feel quite the same.

Reuters News - Analysis: Euro zone action inches forward in game of chicken

A general view of a structure of the Euro currency sign is seen in front of the European Central Bank (ECB) headquarters in Frankfurt August 2, 2012.

Credit: Reuters/Alex Domanski

By Paul Taylor

PARIS | Mon Aug 6, 2012 1:55am EDT

(Reuters) - "After you."

"No, after you."

The euro zone is inching towards a new plan to tackle its debt crisis in a three-dimensional game of chicken among all the main players.

The European Central Bank's heavily qualified offer last week to step in and buy bonds to bring down the borrowing costs of Spain and Italy was the latest gambit in this game.

Each of the main protagonists - the central bank, the countries under pressure, EU paymaster Germany, and governments already under a bailout program - is angling for others to make the first move and carry the brunt of the cost.

There is also a game of chicken between the ECB and bond market investors, who have driven the 17-nation currency area to the brink of dislocation due to a lack of confidence in its policymakers' ability to overcome the crisis.

Draghi sought to intimidate speculators out of betting against the single currency, saying European monetary union was "irrevocable" and it was pointless to short the euro.

Expect things to get worse in the markets, in political arm-wrestling and perhaps on the streets of Athens and Madrid before decisive action is forthcoming in late September.

Spain and Italy had hoped the ECB would step in to support them on the basis of their existing austerity measures without having to endure the political stigma of applying for a bailout.

But the ECB, the only federal institution capable of rapid and massive intervention, is willing to act only if Spain first requests assistance and accepts strict policy conditions and surveillance, and if euro zone governments commit their own money by activating their rescue funds.

"The Spanish seemed to think they could get a free ride from the ECB without conditions. That was never going to happen," said a senior euro zone policymaker, speaking on condition of anonymity because of the sensitivity of the matter.

Spanish Prime Minister Mariano Rajoy has now opened the door to requesting help, saying he will take a decision in "what I believe to be in the best interest of the Spanish people" once he knows what is ECB was prepared to do and on what terms.

Italy, with a bigger debt mountain but a far better budget position, strong domestic savings and more robust banks, is hoping its borrowing costs will fall once the ECB intervenes to back Spain, without having to request a program itself.

Italian Prime Minister Mario Monti sought to nudge Rajoy in that direction when they met last week, diplomats said, although he is aware of a risk that if Madrid gets a bailout, markets may speculate that Italy will be next, and turn their fire on Rome.

HOMEWORK

Germany, the biggest contributor to euro zone rescue funds, is maneuvering for others to do their "homework" so that its overall financial liability does not increase. Chancellor Angela Merkel does not want to go back to parliament to seek more bailout money in a pre-election year, least of all forGreece.

Merkel and Finance Minister Wolfgang Schaeuble have kept quiet on vacation, deflecting pressure from the United States and the International Monetary Fund for quick action to support Spain and Italy.

EU leaders cannot do much until the German Constitutional Court gives an expected green light to the euro zone's permanent bailout fund, the European Stability Mechanism, on September 12. The caretaker Dutch government is also keen to avoid any new rescue before a general election in the Netherlands on the same day.

Meanwhile Greece, which could run out of money next month, is hoping international lenders will be so scared of the mayhem a Greek euro exit would wreak on the European economy and the single currency that they will give it more time to implement a second bailout program and write down more of its debt.

And Ireland, bailed out in 2010, is seeking to ensure it gets the same concessions granted Spain or Greece, to reduce the cost of cleaning up its own shattered banks.

BURNED

ECB President Mario Draghi's carefully hedged announcement of possible bond buying should not have surprised investors, although the initial market sell-off reflected dismay that there would be no immediate action.

Draghi has his own constraints, with Germany's powerful Bundesbank looking suspiciously over his shoulders. For the sake of the ECB's credibility he cannot print money unconditionally to support indebted governments.

The ECB was burned last year when then Italian Prime Minister Silvio Berlusconi reneged on reform commitments as soon as the central bank began buying Italian and Spanish bonds to bring down their borrowing costs.

So Draghi was bound to look to the European Commission and euro zone governments to enforce stricter fiscal and economic reform conditions on any assistance this time.

Furthermore, the ECB said it would buy shorter-term debt, easing the immediate funding stress and repairing the transmission of its monetary policy while maintaining longer-term pressure on the beneficiaries for economic reforms.

The aim of the plan taking shape is to keep Madrid and Rome in the capital markets at an affordable cost both to them and to euro zone governments, whose rescue funds are too small to cover Spain's full funding needs for three years, let alone Italy's.

The ECB remains the only body with unlimited firepower to make the markets blink. Aware of design flaws in its previous limited bond-buying program, Draghi did not rule out much more massive intervention this time, saying it would be "adequate".

The trick in the ECB's game of chicken will be to cow speculation against the euro zone without losing German support or letting the assisted member states off the reform hook.

Rajoy's shift suggests it may be "game on".

(Writing by Paul Taylor; Editing by Toby Chopra)

Reuters News - NASA rover Curiosity makes historic Mars landing, beams back photos

 In this image from NASA TV, shot off a video screen, one of the first images from the Curiosity rover is pictured of its wheel after it successfully landed on Mars.

Credit: Reuters/Courtesy NASA TV/Handout

By Steve Gorman and Irene Klotz

PASADENA, California | Mon Aug 6, 2012 7:25am EDT

(Reuters) - NASA's Mars science rover Curiosity performed a daredevil descent through pink Martian skies late on Sunday to clinch an historic landing inside an ancient crater, ready to search for signs the Red Planet may once have harbored key ingredients for life.

Mission controllers burst into applause and cheers as they received signals confirming that the car-sized rover had survived a perilous seven-minute descent NASA called the most elaborate and difficult feat in the annals of robotic spaceflight.

Engineers said the tricky landing sequence, combining a giant parachute with a rocket-pack that lowered the rover to the Martian surface on a tether, allowed for zero margin for error.

"I can't believe this. This is unbelievable," enthused Allen Chen, the deputy head of the rover's descent and landing team at the Jet Propulsion Laboratory near Los Angeles.

Moments later, Curiosity beamed back its first three images from the Martian surface, one of them showing a wheel of the vehicle and the rover's shadow cast on the rocky terrain.

NASA put the official landing time of Curiosity, touted as the first full-fledged mobile science laboratory sent to a distant world, at 10:32 p.m. Pacific time (1:32 a.m. EDT/0532 GMT).

The landing marked a much-welcome success and a major milestone for a U.S. space agency beset by budget cuts and the recent cancellation of its space shuttle program, NASA's centerpiece for 30 years.

The $2.5 billion Curiosity project, formally called the Mars Science Laboratory, is NASA's first astrobiology mission since the 1970s-era Viking probes.

"It's an enormous step forward in planetary exploration. Nobody has ever done anything like this," said John Holdren, the top science advisor to President Barack Obama, who was visiting JPL for the event. "It was an incredible performance."

Obama himself issued a statement hailing the Curiosity landing as "an unprecedented feat of technology that will stand as a point of national pride far into the future."

"It proves that even the longest of odds are no match for our unique blend of ingenuity and determination," he said.

CHECKUP FOR CURIOSITY BEFORE IT ROVES

While Curiosity rover appears to have landed intact, its exact condition was still to be ascertained.

NASA plans to put the one-ton, six-wheeled, nuclear-powered rover and its sophisticated instruments through several weeks of engineering checks before starting its two-year surface mission in earnest.

"We're going to make sure that we're firing on all cylinders before we blaze out across the plains," lead scientist John Grotzinger said.

The rover's precise location had yet to be determined, but NASA said it came to rest in its planned landing zone near the foot of a tall mountain rising from the floor of a vast impact basin called Gale Crater, in Mars' southern hemisphere.

Launched on November 26 from Cape Canaveral, Florida, the robotic lab sailed through space for more than eight months, covering 352 million miles (566 million km), before piercing Mars' thin atmosphere at 13,000 miles per hour -- 17 times the speed of sound -- and starting its descent.

Encased in a protective capsule-like shell, the craft utilized a first-of-its kind automated flight-entry system to sharply reduce its speed.

Then the probe rode a huge, supersonic parachute into the lower atmosphere before a jet-powered backpack NASA called a "sky crane" carried Curiosity most of the rest of the way to its destination, lowering it to the ground by nylon tethers.

'SEVEN MINUTES OF TERROR'

When the rover's wheels were planted firmly on the ground, the cords were cut and the sky crane flew a safe distance away and crashed.

The sequence also involved 79 pyrotechnic detonations to release exterior ballast weights, open the parachute, separate the heat shield, detach the craft's back shell, jettison the parachute and other functions. The failure of any one of those would have doomed the landing, JPL engineers said.

NASA sardonically referred the unorthodox seven-minute descent and landing sequence as "seven minutes of terror."

With a 14-minute delay in the time it takes for radio waves from Earth to reach Mars 154 million miles (248 million km) away, NASA engineers had little to do during Curiosity's descent but anxiously track its progress.

By the time they received radio confirmation of Curiosity's safe landing, relayed to Earth by a NASA satellite orbiting Mars, the craft already had been on the ground for seven minutes.

NASA engineers said the intricate and elaborate landing system used by Curiosity was necessary because of its size and weight.

Over twice as large and five times heavier than either of the twin rovers Spirit and Opportunity that landed on Mars in 2004, Curiosity weighed too much to be bounced to the surface in airbags or fly itself all the way down with rocket thrusters -- systems successfully used by six previous NASA landers, engineers said.

Curiosity is designed to spend the next two years exploring Gale Crater and an unusual 3-mile- (5 km-) high mountain consisting of what appears to be sediments rising from the crater's floor.

Its primary mission is to look for evidence that Mars - the planet most similar to Earth - may have once hosted the basic building blocks necessary for microbial life to evolve.

The rover comes equipped with an array of sophisticated instruments capable of analyzing samples of soil, rocks and atmosphere on the spot and beaming results back to Earth.

One is a laser gun that can zap a rock from 23 feet away to create a spark whose spectral image is analyzed by a special telescope to discern the mineral's chemical composition.

Mission controllers were joined by 1,400 scientists, engineers and dignitaries who tensely waited at JPL to learn Curiosity's fate, among them film star Morgan Freeman, television's "Jeopardy!" host Alex Trebek, comic actor Seth Green and actress June Lockhart of "Lost in Space" fame. Another 5,000 people watched from the nearby California Institute of Technology, the academic home of JPL.

"There are many out in the community who say that NASA has lost its way, that we don't know how to explore, that we've lost our moxie. I think it's fair to say that NASA knows how to explore, we've been exploring and we're on Mars," former astronaut and NASA's associate administrator for science, John Grunsfeld, told reporters shortly after the touchdown.

(Editing by W Simon)

Reuters News - Draghi opens door to new ECB policy territory

 By Paul Carrel and Eva Kuehnen

FRANKFURT | Thu Aug 2, 2012 5:59pm BST

(Reuters) - Mario Draghi is leading the European Central Bank into a new policy era.

Although the Italian stuffed his "guidance" on fresh ECB action with caveats and conditions, he opened the door to a new round of policy action that could even involve quantitative easing - a bold step the ECB has previously shunned.

Markets were disappointed that Thursday's ECB policy meeting did not result immediately in concrete crisis fighting measures after Draghi, the bank's chief since November, said last week the bank would do "whatever it takes" to preserve the euro.

But Draghi's room for manoeuvre is limited by Germany's powerful Bundesbank, which he singled out in his post-meeting news conference as having expressed reservations about the decision to explore "outright open market operations".

The Bundesbank's reservations mean the ECB will only buy Spanish and Italian sovereign bonds after euro zone governments activated the region's bailout fund to do the same. This in turn would happen only if countries requested such aid.

The lack of immediate action may have underwhelmed markets but Holger Schmieding, economist at Berenberg Bank, said that on balance, Draghi delivered on his promises.

"Whatever the short-term gut reaction of markets today, the ECB announcement today constitutes serious progress," said Schmieding. "This time, the ECB explicitly vowed to do what it takes to achieve its target."

Financial markets had rallied in the run-up to Thursday's ECB meeting in the hope the bank would come up with concrete crisis fighting measures.

After Draghi presented the ECB's plans, Italian and Spanish bonds yields rose, European shares extended falls and the euro fell against the dollar in volatile trade.

Draghi is getting ready to deliver but first he needs to make sure the bailout funds are involved in order to assuage Bundesbank chief Jens Weidmann, whose predecessor quit in protest at the ECB's last round of bond purchases - a programme he felt amounted to monetary financing of governments.

Fleshing out a plan he hinted a week ago, Draghi took a heavily conditioned step on Thursday towards a new round of bond buying to drag down Spanish and Italian borrowing costs.

The ECB would also consider other "non-standard" measures to rein in the euro zone crisis, he said, hinting it might move to quantitative easing - or printing money - by not withdrawing all the money it creates to buy bonds.

Barclays Capital said the remarks were "a clear sign that the ECB is prepared to change policy significantly at its September meeting, in terms of purchasing debt without claiming seniority subject to the EFSF being deployed to buy government debt".

A Reuters poll of nearly 50 economists taken after Draghi's news conference said the ECB would gear up to buy sovereign bonds on the open market under certain conditions rated Draghi a 7 out of 10 for his performance on the job until now. But the scores ranged from two to 10, where 10 was the highest.

SEPTEMBER MEETING EYED

Markets will now set their sights on the ECB's September policy meeting. Some economists have already pencilled in another interest rate cut for September on the back of an update of the ECB's staff projections for the economic outlook.

Lena Komileva, at G+ Economics, is one of them: "The ECB's press conference has essentially confirmed that another rate cut is coming and that the door to a negative deposit rate remains open and is subject to evaluation."

Another cut could see the ECB starting to charge banks for parking money with the central bank overnight in a move to encourage them to use their access funds to lend to other banks, companies or households or purchase assets instead.

And while some in the market were caught on the wrong foot by Draghi's comments, the ECB chief himself was very pleased by the impact of his words.

Asked whether it wouldn't be appropriate to be a bit more careful, Draghi said: "No, it would not actually. I like these remarks very much."

"And they were not misinterpreted, simply markets took their actions based on their expectations following these remarks. That's what happened and these expectations are what they are."

Some analysts said Draghi was trying to gloss over the fact that he had come up short of the expectations he aroused with his "whatever it takes" comment in London last week.

Referring to Spain's 10-year bond yields over the past week, which fell after Draghi's comments in London and spiked again after Thursday's news conference, Monument Securities' Ostwald said:

"I believe his economics and communications teachers would have him in detention and on extra homework for a very protracted period."

(Additional reporting by Sakari Suoninen. Editing by Jeremy Gaunt.)

Reuters News - Congress approves new Iran sanctions on oil, shipping sectors

Workers load goods onto ships at the port in Deira February 27, 2012.

Credit: Reuters/Ashraf Abu Omar

By Roberta Rampton

WASHINGTON | Wed Aug 1, 2012 8:40pm EDT

(Reuters) - The Congress overwhelmingly passed a new package of sanctions against Iran on Wednesday that aims to punish banks, insurance companies and shippers that help Tehran sell its oil.

The legislation, agreed to by senior lawmakers of both parties, "seeks to tighten the chokehold on the regime beyond anything that has been done before," said Republican Representative Ileana Ros-Lehtinen, chair of the House Foreign Affairs Committee.

The bill now heads to the White House for President Barack Obama's signature. It builds on oil trade sanctions signed into law by Obama in December that have prompted Japan, South Korea, India and others to slash their purchases of Iranian oil.

The United States, European Union, and other Western nations are trying to stop Iran's suspected pursuit of nuclear weapons. Iran says its nuclear program is for peaceful purposes.

"We are taking another significant step to block the remaining avenues for the Iranians to fund their illicit behavior and evade sanctions," said Democratic Senator Tim Johnson, chairman of the Senate Banking Committee.

The Senate passed the sanctions bill unanimously and the House passed it on a vote of 421-6.

Lawmakers from both parties said they are prepared to take additional steps.

"There is more we can do, more that we will do if Iran doesn't end its nuclear weapons program verifiably and completely," said Representative Howard Berman, the top Democrat on the foreign affairs panel.

The bill was endorsed by the American Israel Public Affairs Committee, a powerful pro-Israel lobby group, which said the measure when coupled with existing U.S. sanctions "represents the strongest set of sanctions to isolate any country in the world during peacetime."

Obama announced U.S. sanctions on Tuesday against foreign banks that help Iran sell its oil, specifically citing China's Bank of Kunlun and an Iraqi bank.

The sanctions followed criticism from Republican presidential challenger Mitt Romney that the White House had failed to act strongly enough.

China's Foreign Ministry said the sanctions announced by Obama would hurt cooperation betweenChina and the United States.

"The U.S. has invoked domestic law to impose sanctions on a Chinese financial institution, and this is a serious violation of international rules that harms Chinese interests," ministry spokesman Qin Gang said in a statement.

The United States gave China, Iran's top customer for oil, a six-month reprieve from sanctions in June, saying it had cut its purchases. That decision sparked criticism in Congress. China's imports had fallen early in the year due to a pricing dispute, but have since rebounded.

(Additional reporting by Samson Reiny and Donna Smith; Editing by Stacey Joyce and Jackie Frank)

Reuters News - U.S. raises pressure for euro zone crisis action

A woman in a wheelchair passes the shop window of a clothing store in Pontevedra, northern Spain, June 29, 2012.

Credit: Reuters/Miguel Vidal

By Paul Carrel and Gernot Heller

FRANKFURT/BERLIN | Wed Aug 1, 2012 8:18am EDT

(Reuters) - The United States raised pressure oneuro zone leaders to take decisive action to solve the region's debt crisis, notably by lowering troubled members' borrowing costs, on the eve of a crucial European Central Bank meeting.

U.S. Treasury Secretary Timothy Geithner said the euro zone must take steps including "bringing down interest rates in the countries that are reforming and making sure those banking systems can provide the credit those economies need".

He made the comments in an interview with Bloomberg Television recorded in Los Angeles on Tuesday and broadcast on Wednesday, a day after he flew toGermany to meet Finance Minister Wolfgang Schaeuble and ECB President Mario Draghi.

Italy and Spain, the euro zone's fourth and third largest economies, could lose access to credit markets as the risk premium investors demand to hold their bonds rather than safe-haven German debt has spiraled to levels considered unsustainable in the long term.

But German Vice-Chancellor Philipp Roesler rejected pressure for the ECB to step in and cap the borrowing costs of troubled euro zone countries, saying the central bank should stick to fighting inflation and not ease the market incentive to reform.

"If you take away the interest rate pressure on individual states, you also take away the pressure on them to reform," Roesler, economy minister and leader of the Free Democrats, junior partners in Chancellor Angela Merkel's centre-right coalition, told reporters in Berlin.

He also reaffirmed Germany's opposition to letting the euro zone's rescue fund borrow from the central bank to buy government bonds, calling it "the road to an inflation union".

Draghi last week said that the central bank would do whatever it takes to preserve the euro, stirring speculation it might take more radical steps when the ECB's policy-setting Governing Council holds its monthly meeting on Thursday.

Geithner said Schaeuble and Draghi had walked him through plans they were putting in place to try to solve the crisis, but he cautioned against expecting immediate action.

"What you know, from what Europe has said, that they are committed to doing what's necessary to hold the Europe Union together," said Geithner. "I absolutely believe they have the means to do it."

Geithner said past financial crisis showed that the longer it took to address the issues, the more they cost.

"I believe they understand that. That's why they've signaled they are prepared to move further. Now again, this is going to take time," he added.

Market expectations of a major ECB move this week have faded after a spike following Draghi's comments, with European shares slipping and a rally in Spanish and Italian bonds petering out.

But those traders and investors who expect action on Thursday would sell the euro and European shares and drive up Spanish and Italian bond yields if the ECB did nothing.

Nick Parsons, head of markets strategy at nabCapital in London, predicts the euro could fall a couple of U.S. cents from current levels, while bond market analysts expect Spanish yields to reach new euro-era highs if the ECB does not act.

MONTI ON TOUR

Italian Prime Minister Mario Monti, touring Europe to press for action to bring down Rome's borrowing costs, made his pitch to euro zone hardliner Finland on Wednesday, saying Italy did not need an assistance program but it might in future need "a breathing break" from high interest rates.

"The basic idea is that Italy does not seem to need special aid right now, especially not to save its economy," Monti was quoted as saying by Finnish daily Helsingin Sanomat on the day he was due to meet Prime Minister Jyrki Katainen.

He added that it was frustrating that reforms his government has carried out are not reflected in interest rates. The euro area financial crisis has sent the group's third largest economy's borrowing costs spiraling.

Central bank sources have told Reuters that intervention could be at least five weeks away because Draghi's comments had not been agreed in advance with the Governing Council, and other elements must first fall into place.

The sources said the ECB could revive its mothballed sovereign bond-buying program in tandem with the euro zone's rescue funds, but Spain would first have to request assistance, which it has resisted so far.

Euro zone leaders would have to agree to the rescue funds buying up government bonds, and the German Constitutional Court would have to uphold the legality of the bloc's permanent rescue fund in a ruling due on September 12.

The leaders have spent the past week issuing statements promising to take whatever steps are necessary to rescue the currency, but none has raised expectations as high as Draghi, who heads the only federal European institution able to act swiftly and decisively.

However, the ECB is divided with Germany's influential Bundesbank opposed to reviving government bonds or giving the euro zone rescue fund a banking license so it can borrow from the central bank to buy unlimited quantities of bonds.

Draghi met Bundesbank chief Jens Weidmann privately earlier this week to try to reconcile differences on what action the bank might take. Neither bank would comment on the meeting.

The Bundesbank released on Wednesday a June 29 interview for an in-house publication in which Weidmann said governments expected too much from the central bank, and what they wanted did not always make economic sense.

"Politicians overestimate the central bank's capacity and place too many demands of it," he said.

"Whether it's about interest rates or any sort of special measures, in the end it always comes down to the same thing: trying to rope the central bank into meeting fiscal policy objectives."

Weidmann said the Bundesbank would continue to defend its positions firmly "so that the (European) monetary union remains a stability union".

With the economy slowing and inflation under control, other options on the ECB's radar screen include a possible further cut in interest rates and a further loosening of rules on the collateral it will accept to lend funds to banks.

Unemployment in the euro zone in June hit its highest level since the single currency was born, at 11.2 percent, while data released on Tuesday showed capital fleeing Spanish banks at a growing rate.

(Additional reporting by Terhi Kinnunen in Helsinki, Swaha Pattanaik and Richard Hubbard in London, Eva Kuehnen in Frankfurt; Writing by Paul Taylor; editing by Anna Willard)