ECB halts bond purchases for first time since August

February 21, 2012

Data published by the European Central Bank on Monday revealed that the bank bought no bonds of eurozone nations last week, the first time since August that such purchases have been zero.

The ECB first launched its bond-buying programme, or Securities Market Programme (SMP), in 2010 to help out debt-wracked eurozone countries that were finding it difficult to drum up financing the normal way via the markets.

The programme was controversial from the start, with critics saying the ECB was overstepping its mandate in buying up sovereign bonds on the secondary market.

ECB President Mario Draghi and his predecessor Jean-Claude Trichet always said the measures were only temporary and aimed at easing strains in the 17-nation euro bloc, but two prominent German ECB members even quit in protest over the practice.

Between January and August 2011, the purchases dried up, but the ECB resumed the programme in August when renewed strains pushed Italian and Spanish borrowing rates to unsustainable levels.

At one point the purchases reached as much as 22 billion euros ($US29 billion) in a single week.

In total, the ECB has now bought a total 219.5 billion euros in eurozone government bonds since the start of the programme.

AFP