ECB says will buy euro zone government, private bonds

BASEL, Switzerland (BestGrowthStock) – The European Central Bank will buy euro zone government and private debt, it said on Monday, abandoning resistance to full-scale bond purchases in light of Greece’s debt crisis.

The ECB said in a statement the scope of the purchases was yet to be determined, but they would be offset by liquidity-absorbing operations so as to not affect the stance of monetary policy.

Trichet said after the ECB’s monthly meeting on Thursday that policymakers had not discussed buying government bonds, but speculation had increased that it would need to take drastic action to stem contagion from Greece’s woes.

The ECB also announced longer-term refinancing operations for three and six months and said it would reactivate currency swap lines with the U.S. Federal Reserve to lend in dollars.

European laws prevent the ECB from buying debt directly from governments in the way the United States and Britain’s central banks have done during the financial crisis. However, it can get round this restriction by buying debt second-hand from banks.

The ECB announced a 60 billion program to buy covered bonds last year but this would be its first foray into buying government debt.

Greece’s debt crisis has driven the cost of its sovereign debt and its insurance to record levels. The problems have also started to push up debt costs for other euro zone members with strained public finances such as Portugal, Spain and Ireland.

Money

(Reporting by Krista Hughes and Sven Egenter)

ECB says will buy euro zone government, private bonds