Italy will push this week at a meeting of euro zone finance ministers for a semi-automatic mechanism involving the European Central Bank or the permanent bailout fund ESM to reduce spreads of euro zone bonds over Germany, Italy's European Affairs Minister Enzo Moavero said on Monday.

Italy has long complained about the rising returns that investors demand to hold its debt rather than benchmark German bonds, saying markets were not fully taking into account its reforms. Italy's benchmark 10-year bond yields rose to 6.06 percent on Monday, taking the additional return compared with German Bunds to 4.63 percentage points.

"The idea is to possibly discuss at the Eurogroup/Ecofin this week mechanisms which would be triggered semi-automatically when spreads widen too much, with the aim to reduce them," Moavero told reporters in Brussels, adding that this it is an option currently under debate.

Euro zone finance ministers and ECB President Mario Draghi meet in Luxembourg on Thursday and are joined by their non-euro zone colleagues from European Union countries on Friday.

The European Central Bank has a program enabling it to buy government bonds in order to stop spreads ballooning. But it bought no government bonds for the 14th week in a row last week, ECB data showed on Monday, resisting pressure to intervene despite tensions before the Greek election and rising Spanish financing costs.

The ECB has bought hardly any bonds from euro zone countries since Mario Draghi took over as president in November as policymakers have become increasingly wary of the program, emphasizing the need for governments to tackle the crisis.

Speaking about the automatic mechanism proposal, Moavero said: "The ECB may do it, but in a framework which would respect its autonomy. The mechanisms would make automatic something that the ECB has so far done autonomously. The European Stability Mechanism (ESM) may also do that, although it cannot act as a bank."

Asked if the ECB should re-start its Securities Market Programme (SMP) of buying bonds on the market, which was originally justified as needed to ensure that markets reflected its monetary policy decisions, Moavero said:

"We do not ask them, because we respect the autonomy of the ECB, but obviously any move to reduce spreads is welcome."

Moavero also said that he doubted if the euro zone's permanent bailout fund, the ESM, would be operational by early July as planned because of the ratification schedule in euro zone countries.

"Considering the state of the ratification process (in all of Europe), it is unlikely that the ESM can enter into force at the beginning of July as we initially planned," Moavero said.

Italy has not completed the process of ratifying the ESM yet in the Senate and is at an earlier stage in the Lower Chamber. France, Greece, Slovenia and four others have already ratified the ESM treaty and Germany will vote on it on June 29.

"It's not impossible to finish the process (in Italy) before the summer break, but it is unlikely to respect the July deadline," Moavero said.

(Reporting by Francesco Guarascio; Writing by Jan Strupczewski; Editing by Ruth Pitchford)

http://www.reuters.com/article/2012/06/18/us-eurozone-spreads-mechanism-idUSBRE85H1C420120618