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ECB spent $18.8 billion on bond buys last week

ECB spent $18.8 billion on bond buys last week

The European Central Bank stepped up its emergency bond purchases last week to keep the eurozone debt crisis from infecting Italy and Spain. The move, however, was accompanied by a warning to governments from the bank's next head that the support is temporary.
The (EURO)13.3 billion ($18.7 billion) purchases announced on the bank's Twitter feed Monday were double the (EURO)6.65 billion spent the previous week.
The bank has been buying Italian and Spanish government bonds since Aug. 8. The purchases hold down the interest yields on the bonds, and have kept bond market turmoil from pushing those countries over the edge while European political leaders struggle to come up with more permanent fixes.
Mario Draghi, who will take over as head of the ECB Nov. 1 from Jean-Claude Trichet, said at a conference in Paris that the purchases would continue but warned they are not a permanent solution.
He and Trichet warned governments to move ahead with agreed plans to reduce debt and ease the fears of default that are roiling markets.
Leaders agreed on July 21 to give the eurozone's (EURO)440 billion bailout fund the authority to take over the bond purchases, help bail out banks and quickly loan to troubled governments.
But approval by national parliaments has been delayed by August vacations and some politicians are against the new measures.
One of the government parties in euro member Slovakia says a vote may not take place until December. Slovak Finance Ministry spokesman Martin Jaros, however, said Monday that the vote is still expected as soon as possible, in late September or early October. "We realize the urgency of the situation," he said.
Greece, Ireland and Portugal have already needed bailouts from other eurozone governments after being unable to refinance expiring debt at affordable rates.
Italy, the eurozone's third-largest economy, is regarded as too large to bail out.
The bank's bond purchases are risky since they take more risk onto the bank's balance sheet and are seen by some as blurring the line between monetary policy and budget policy, since they indirectly support indebted governments.
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Karel Janicek in Prague and Sarah DiLorenzo in Paris contributed to this report.


Updated : 2021-10-19 19:35 GMT+08:00