Market bond rates not always justified

EU President Herman Van Rompuy said Wednesday that the lending rates imposed on some countries by sovereign debt markets are not always backed by their economic fundamentals. "Risk premiums for some countries are not always justified by their economic fundamentals," he told EU ambassadors. European leaders have been trying to find a way to lower the lending rates imposed on heavily-indebted countries such as Spain and Italy. Rompuy added that he fully supported the European Central Bank's bid at outlining a series of actions "to deal with the fragmentation in financial markets". ECB chief Mario Draghi signaled last week that the bank may have to "go beyond standard monetary policy tools" to ensure that it achieves its mandate of maintaining price stability. In a piece published in German daily Die Zeit, the central bank chief argued that when markets are "fragmented or influenced by fears, our monetary policy signals do not reach citizens evenly across the euro area." "We have to fix such blockages to ensure a single monetary policy and therefore price stability for all euro area citizens," the Italian central banker said. Van Rompuy noted that many EU leaders whom he has spoken to recently have the political will to deal with the problem. "There is a genuine willingness amongst EU leaders to address the systemic nature of the crisis. To finish a house half-built," he said.