ECB defends bond-buying plan amid protests

MADRID/BERLIN - Angry protestors who were worried about a new round of austerity clashed with police in Madrid on Tuesday while European Central Bank (ECB) President Mario Draghi tried to sell his bond-buying plan in Berlin.

The Spanish government is expected to unveil on Thursday its draft budget plan for 2013, including a new austerity package aimed to check its bloated budget deficit to 4.5 percent of GDP in 2013.

The predicted austerity measures rekindled popular anger and prompted tens of thousands Spaniards to rally around the Parliament building to demand the resignation of Prime Minister Mariano Rajoy.

The initially peaceful demonstration turned nasty as police fired rubber bullets and beat protestors to bar them from breaking down barricades set up at the crossroads leading to the Parliament building.

The police said 22 people were arrested and at least 28 injured.

Exhausted by months of austerity, Madrid is still struggling to curtail government expenditure with its half-year deficit standing at about 4.3 percent of GDP, already exceeding half of the set target of 6.3 percent.

Uncertainty continues to vex investors who are eager to see the Spanish government ask for international bailout, a precondition for the ECB to tap its bond-buying program laid out earlier this month.

The ECB's plans for potentially unlimited purchases of debt issued by deeply indebted eurozone countries to help them lower borrowing costs have spark storms of scepticism in Germany, where some believed the move would compromise the central bank's independence and fan inflation.

In his address to a conference of the Federation of German Industries in Berlin on Tuesday, Draghi tried to sell the bond-purchase plan to a skeptical German audience.

He reassured them that the bold steps to buy bonds of debt-ridden countries would not encourage political inertia, but to buy time for structural reforms.

"The ECB's action can only be the bridge to the future. The project must be completed through decisive actions by government both individually and collectively," Draghi said.

He also urged the embattled euro members to act swiftly to translate their solemn vows for radical overhaul into real action, before investors' confidence buoyed by the central bank's plan faded.

Before attending the industry conference, Draghi held talks with German Chancellor Angela Merkel at a conclave, both agreeing on the needs for the euro zone to introduce reforms to boost competitiveness and restore credibility.

"Considerable willingness to reform is necessary in Europe - among nation states as well as within the currency union - in order to improve competitiveness and regain credibility," Merkel's spokesman Steffen Seibert said.

The spokesman did not reveal details of the Merkel-Draghi talks.

The ECB chief has been invited to explain his euro-rescuing plans to the German lower house of parliament, but no date has been announced for his visit to the Bundestag.