UPDATE 1-ECB’s Weber-Bond buying carries risk, to be limited

* Weber critical of government bond buying plan

* Buying to be limited, aimed at restoring market functioning

(adds quote, background, detail)

FRANKFURT, May 10 (BestGrowthStock) – The European Central Bank’s
decision to buy government bonds carries a significant risk for
price stability and must be limited to achieving their purpose,
Governing Council member Axel Weber warned on Monday.

Euro zone central banks started buying up government bonds
on Monday as part of a $1 trillion bid to resolve the debt
crisis gripping the region.

“Buying government bonds entails considerable stability
policy risks, and thus I regard this part of the ECB council’s
decision critically in this exceptional situation,” he told the
business daily Boersen-Zeitung.

“It now depends decisively to keep these risks as low as
possible. Therefore these purchases are very limited: their only
goal is to restore the efficient functioning of bond markets and
the monetary policy transmission mechanism.”

“The liquidity which would be introduced, would again be
sterilized,” he added.

A Bundesbank spokesman later said Weber was referring to the
purpose of the purchases being limited rather than the scale.

The ECB’s decision to buy bonds is a reversal of its
resistance to full-scale asset purchases as it fights to contain
Greece’s debt crisis.

ECB President Jean-Claude Trichet gave no indication of how
much central banks were prepared to spend on their unprecedented
bond-buying program but said they were doing what was necessary.

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(Reporting by Marc Jones and Marlyn Gerlach; Editing by Ron

UPDATE 1-ECB’s Weber-Bond buying carries risk, to be limited