ECB buys €14bn of government bonds

City A.M. Reporter
The European Central Bank bought €14.291bn (£12.4bn) of government bonds last week, down from €22bn the previous week but still enough to signal its renewed bid to tame debt market tensions is not about to wilt.

The ECB reactivated its controversial bond-buying programme earlier this month after Italy and Spain came closer to succumbing to the debt crisis after a fierce market attack.

The central bank's latest purchases, which span the period of August 11-17, send the programme's total past the €100bn mark to €110.5bn.

The bank does not break down the purchases. However, traders say it has been concentrating its efforts on Italian bonds and that it is continuing to buy.

The ECB resumed its purchases following a 19-week pause in the programme, despite opposition from a four-man group on its policymaking Governing Council, led by Germans Jens Weidmann and Juergen Stark.

Critics of the purchases say they push the ECB into the fiscal policy arena, overstepping its mandate and threatening its independence.

A majority of the bank's policymakers, however, felt obliged to act as action from euro zone governments failed to stem the spread of the bloc's debt crisis.

The internal split over the purchases within the ECB is raising questions about its appetite to remain in markets.

The bank has said it will "actively implement" the programme although board member Juergen Stark said on Friday it was a temporary measure designed to buy time for troubled members.

Purchases take 2-3 days to settle, meaning that when the ECB is buying, the weekly figures do not necessarily give the full picture.

The ECB and the 17 euro zone national central banks can buy government and corporate bonds from banks and other investors under the programme, but not directly from governments.