UPDATE 1-Coeure says EU funds' support enough for ECB buying
JOUR-EN-JOSAS, France Aug 31 (Reuters) - France's member on the ECB executive board Benoit Coeure appeared to take a softer line than his German colleague on conditions for the central bank buying sovereign debt, saying on Friday that simply support of the EU's rescue funds would suffice.
Late on Thursday, European Central Bank Executive Board member Joerg Asmussen said the bank should only buy sovereign bonds if the International Monetary Fund was involved in setting economic reform programmes that should be a condition for its intervention.
The ECB is preparing to lower painful borrowing costs in Spain and Italy, in the teeth of Bundesbank opposition, in order to buy the euro zone governments time to negotiate legal and political hurdles to a longer-term response to the euro zone crisis.
Coeure, who joined the ECB's six-man Executive Board at the start of this year, said that any intervention by the central bank in the short-term sovereign bond market must be subject to "strict conditionality".
"From my point of view, this means a request for support from the EFSF and the ESM (rescue funds) on the primary debt market," he told a business conference outside Paris.
"The integrity of the euro is under threat," he said. "The ECB will do everything possible within the limits of its mandate to defend the euro's integrity."
The bank was studying ways of ensuring that money it had created with its LTRO issuance of three-year liquidity in late 2011 and early 2012 was reaching households and businesses in the 17-nation monetary zone.
He said that proposals for a "banking union" - involving joint financial regulation and banking resolution in the currency area - was a step in this direction but the bank stood ready to use new instruments.
Coeure said that capital markets in the euro zone were not functioning normally and he said banks in the currency zone must continue to lend outside their national borders.
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