Intransigence hides subtle shifts for EU Although some leaders came to a two-day summit in Brussels with plans for intricately designed financial engineering to help shore up Italian and Spanish bond markets, German officials and their northern European allies have stood firm - if the eurozone is to help Rome and Madrid, it will be with the tools they now have. "I am not prepared to think up all kinds of new instruments," said Mark Rutte, the Dutch prime minister who has been one of Berlin's closest allies. There are existing instruments, under strict conditions, which countries can use who can't make it on their own. But in that seeming intransigence lies a subtle shift. Until now, the German-led alliance has been reluctant to take more action to lower Spanish and Italian borrowing costs, arguing that such short-term action was counterproductive unless Madrid and Rome did more to get their own economic house in order. Now, eurozone leaders are actively considering which of a burgeoning array of tools created over the course of the last year they should now deploy to bring down Italian and Spanish borrowing costs, both of which continued to rise on Thursday. The simplest plan, officials said, would be using the eurozone's €440bn bailout fund to directly buy Spanish or Italian bonds on the open market. But the European Central Bank made a similar effort last summer and ended up spending upwards of €14bn per week - levels that would quickly deplete the fund's coffers. "It would be really inefficient and ineffective and would only last until the €440bn was gone," said Megan Greene, head of European economics at Roubini Global Economics. As a result, officials said the focus of the deliberations had shifted to purchasing bonds on the primary market - essentially buying bonds directly from governments as they auction them. For creditor countries, such a plan has clear advantages, particularly the fact that rescue money could be doled out in much smaller amounts, depending on the size of the auction. Under already agreed guidelines, the European Financial Stability Facility - the bailout fund - could promise to buy up to 50 per cent of bonds issued, in essence creating a price floor that could lure private investors back in. Indeed, some officials said on Thursday that the mere threat of EFSF intervention in the primary market could be enough - by setting the floor, it may not have to spend a single euro if private investors were convinced they had an EFSF backstop. For Italy, however, there is a significant drawback: such a programme comes with Greek-style monitoring missions from EU authorities. Creditor countries see such monitoring, tied to a legal memorandum, as a way to lock Italy into a reform plan that would live even when Mario Monti, the technocratic prime minister, leaves office early next year. Even with a primary market programme, however, questions remain over whether the EFSF has enough resources for a Spanish bank rescue, which could total up to €100bn, and separate bond-buying operations for Madrid and Rome. As a result, officials have discussed going back to plans agreed last year - but never used - to increase the EFSF's firepower by using it as a loss insurance scheme instead of directly buying bonds. "As the EFSF's resources are limited it would need to be leveraged, and it's unclear if that can be credibly achieved," said Mujtaba Rahman, a Europe analyst at the Eurasia Group risk consultancy. Under such a plan, the EFSF would create a special investment fund that would attract private buyers by promising that any losses on Italian or Spanish bonds would be paid for by the EFSF, where as any gains would be left to the private investors. Such loss insurance plans have failed in the past to attract private investors, however. They were unveiled with great fanfare last year at an EU summit, where leaders said it would increase the firepower of the EFSF from €440bn to as much as €2tn. Without private investors, though, such leveraging schemes cannot work, since they rely on using EFSF funds as guarantees against private sector losses instead of purchasing bonds outright. In Italy and Spain's case, however, such hurdles could be overcome by pressing domestic banks to participate. Spanish and Italian banks invested heavily in their countries" sovereign debt earlier this year after borrowing billions of euros in cheap cash from the ECB as part of its €1tn long-term refinancing operation, and could be similarly lured to participate in such investment funds.