A symphony of light consisting of bars, lines and circles in blue and yellow, the colours of the European Union, illuminates the south facade of the European Central Bank (ECB) headquarters in Frankfurt, Germany, December 30, 2021.
A symphony of light consisting of bars, lines and circles in blue and yellow, the colours of the European Union, illuminates the south facade of the European Central Bank (ECB) headquarters in Frankfurt, Germany, December 30, 2021. Reuters / WOLFGANG RATTAY

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

The ECB is set to announce the 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 has hit the most indebted countries hardest.

ECB staff is preparing different options for policymakers, including how many of its details, such as firepower and duration, should be made public, according to conversations with half a dozen policymakers at the ECB's annual forum in Sintra, Portugal.

The pros of announcing a large envelope would include to put investors' minds at rest about the ECB's commitment to fight what it calls financial fragmentation in the euro zone, the sources said.

It would also put the ECB on the safe side in the likely event it is accused before the courts of bankrolling governments because it would show its intervention is contingent and does not equate to a blank cheque for states, they added.

However, this option could backfire if the number is seen as too small by bond traders, the sources noted. Keeping the July announcement vague would avoid this risk but might leave too many questions unanswered, they added.

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

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

An ECB spokesperson declined to comment for this story.

ECB President Christine Lagarde said on Tuesday the new tool would be "effective ... proportionate and containing sufficient safeguards to preserve the impetus of member states towards a sound fiscal policy."

The ECB has been taken to Germany's top court and to the European Court of Justice over its previous bond-buying scheme by German academics who accused it of financing governments, which is prohibited by European treaties.

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