Draghi leads ECB into critical eurozone debt meeting

(CNN) -- The European Central Bank is expected to announce a new plan Thursday to buy eurozone sovereign debt without revealing a formal cap on borrowing costs, according to published reports, a move that's opposed by the central bank of Germany, the monetary union's largest economy.

Bloomberg News and the Financial Times, both quoting anonymous sources close to the negotiations, are reporting that the bank will propose buying distressed debt without revealing to the market how high bond yields will need to be before it intervenes. The proposal is expected at a Thursday meeting in Frankfurt of the bank's governing council, to be attended by the heads of the central banks of the 17-nation monetary union.

The plan by ECB president Mario Darghi is aimed to help keep interest rates on bonds from Italy and Spain spiraling beyond control. Borrowing costs in Spain and Italy rose to dangerous levels in July but eased in August after Draghi's pledge to do "whatever it takes" to preserve the euro currency.

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Draghi defended the eurozone in an editorial last week in German newsweekly Die Zeit and reiterated that "exceptional measures" are justified to stabilize financial markets. Draghi said the euro was launched as a "currency without a state," built on an "institutional framework" that left it vulnerable to crises.

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But Berlin has been reluctant to back a plan that creates more financial liabilities for German tax payers. "Provision of short-term liquidity alone will not be enough to solve" the crisis, German Foreign Minister Guido Westerwelle said in a speech in Hong Kong last Friday. "You can't solve a debt crisis by creating new debt."

Meanwhile in Greece, ground zero of the eurozone sovereign debt crisis nearly three years ago, representatives from the troika - the International Monetary Fund, the European Central Bank and the European Union - are expected in Athens Friday to audit the progress the nation is making toward meeting bailout requirements. Some voices in the eurozone are calling for Greece to leave the monetary union amid talk the nation may need a third round of bailout cash.

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"As long as you have hanging over Greece the fear of exit you will not get confidence and foreign capital returning back to the country," former Greek Finance Minister George Papaconstantinou told CNN Wednesday.

"Any discussion on a third bailout is bound, obviously, to raise fears of tax payers and the more populist voices in the rest of Europe -- it's completely counterproductive at a time when what is absolutely necessary for this country is the confidence to return," said Papaconstantinou, who is currently Greece's environment minister.

Greece is not looking for a third bailout, but "more time within the second (bailout) package to give the economy more time to recover and more time for fiscal consolidation without necessarily our European partners and the IMF putting up more money," Papaconstantinou said.

Last month, Greek Prime Minister Antonis Samaras met with German Chancellor Angela Merkel in Berlin to plead for more time to push through reforms to public finances. Members of the eurozone are waiting for the troika's report on Greece's troubled economy, due at the end of September, before making a decision.

A leaked letter reportedly sent to Greece's finance and labor ministries from the troika is believed to order drastic labor market reforms to minimum wages and working hours, according to reports. "I don't think a wholesale change, for example going from a five-day to a six-day week, is going to help the competitiveness of the Greek economy," Papaconstantinou said." Labor market reform is part of the answer to improving competitiveness, but so is product market reform ... wages are falling in Greece; prices are not."

CNN's Max Foster, Oliver Joy and CNNMoney's Ben Rooney contributed to this report