Hollande says worth exploring ESM bond buys

LOS CABOS, Mexico, June 19 (Reuters) - French President Francois Hollande said on Tuesday that Italy had proposed using the euro zone's new permanent bailout fund to buy the debt of member states saddled with high borrowing costs and that this was an idea worth exploring.

"Italy has launched an idea which is worth looking at," Hollande told reporters in response to a Reuters question at a G20 summit in Los Cabos, Mexico.

He said the subject would be discussed at a meeting in Rome on Friday between him, Germany's Angela Merkel, Spain's Mariano Rajoy and Italy's Mario Monti.

"The idea is the following: that virtuous countries, like Italy which has taken steps to address its public accounts, can finance their debt at interest rates that are not in line with those countries that are seen to be not making efforts," Hollande said.

"We are looking for ways to use the ESM for this. At the moment it is just an idea, not a decision. It is part of the discussion."

The European Stability Mechanism (ESM) is expected to become operational next month and will have the power to buy sovereign debt in the primary and secondary markets.