The European Central Bank (ECB) said Monday that it made no purchases of euro zone government bonds last week, marking the first time since August that its controversial emergency bond-buying program has not been used.
The bank’s purchases under the Securities Market Program (SMP) had already dwindled to a negligible $78 million the week before that, the BBC reported. The ECB had been buying bonds from investors in the secondary market to push down borrowing costs for beleaguered euro zone economies like Italy and Spain.
The bank is now aiming to reduce strains in the financial system through a new program of large-scale cheap loans to banks, the first tranche of which were made available in December.
Another cash injection will take place at the end of this month. According to The New York Times, analysts predict that banks will borrow up to $1.33 trillion, more than double what they drew in December’s offering.
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The SMP has been reasonably successful, enabling cash-strapped countries to borrow money at lower rates. But some of the bank’s policy makers have said the program blurs the line between monetary and fiscal policy, with former ECB Chief Economist Juergen Stark quitting at the end of last year over the purchases, according to Businessweek.
ECB President Mario Draghi and his predecessor Jean-Claude Trichet always insisted that the divisive measures were temporary, and were geared towards easing strains in the euro zone, according to RTE News.
The program was effectively dormant between January and August 2011, but resumed again in August after Italian and Spanish borrowing rates reached unsustainable levels. Purchases reached as much as $30 billion in a single week at one point.
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