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ECB boosted government bond-buying to ease crisis

ECB boosted government bond-buying to ease crisis

The European Central Bank stepped up its purchases of bonds from governments with shaky finances in early December, an attempt to ease the debt crisis after Ireland's bailout failed to stabilize the market turmoil.
Data published Monday showed that the ECB bought (EURO)2.667 billion ($3.55 billion) in government bonds in the week ended Dec. 10. That's the biggest weekly purchase since July and up from (EURO)1.965 billion a week earlier.
The figure was keenly awaited by the markets to see how much the central bank is prepared to spend on keeping the debt crisis that has rocked countries like Greece, Ireland, Portugal and Spain in recent months at bay.
The euro, which had been gaining steadily Monday, rose further after the figures. It traded at $1.3367 in afternoon European trading, up from $1.3220 in early morning.
Many analysts think the ECB's bond purchases have been the main reason for a stabilization in highly indebted European countries' bond markets this month.
Jean-Claude Trichet, the head of the ECB, said on Dec. 2 that the Frankfurt-based bank would continue buying the bonds of highly indebted governments after a (EURO)67.5 billion bailout of Ireland failed to soothe fears that the debt crisis might force Portugal or Spain into seeking international help.
Since the ECB started its so-called Securities Markets Program in May _ in the wake of the (EURO)110 billion bailout of Greece _ it has bought (EURO)72 billion in government bonds. The ECB started out by buying more than (EURO)16 billion in the first week of the program, but hadn't spent more than (EURO)2 billion a week since early July.
Even though the Securities Markets Program is modest compared with government bond purchases by other central banks, it was been criticized by several members of the bank's governing board, who fear that the ECB is yielding to political pressure to use its financial muscle to contain the debt crisis.
By comparison, the U.S. Federal Reserve has said it will buy $600 billion in government bonds on the coming months to boost economic recovery.