WRAPUP 1-Markets pin hopes on ECB to ease Europe debt crisis

* Expectations that ECB will buy more euro zone bonds

* White House watches crisis, Treasury envoy heads to Berlin

* Germany struggles to sell bonds, Portugal yields spike

* Euro steadies, Asian shares rise on ECB hopes

By Sakari Suoninen and Kevin Plumberg

FRANKFURT/HONG KONG, Dec 2 (BestGrowthStock) – The European Central
Bank is under pressure to act on Thursday to help the euro
zone contain a crippling debt crisis that has stoked contagion
fears in the United States and Asia.

Hopes that the ECB will rush through new anti-crisis
measures, such as expanding its government bond buying, helped
the euro stabilise and lifted stock markets.

But the central bank risks disappointing markets if, as
several analysts predict, it will only decide at its monthly
meeting that its liquidity taps for euro zone banks will stay
wide open and merely hint at more government bond purchases.

“The price action … adds to risk that the market may be
disappointed with today’s outcome,” Citigroup currency and
markets strategists said in a note.

Even European powerhouse Germany struggled to sell its
bonds on Wednesday and Portugal’s borrowing costs soared in
further signs that last weekend’s 85 billion-euro
($110.7-billion) EU-IMF rescue of Ireland and leaders’ pledges
to defend the euro at any cost failed to impress investors.

European Union leaders appeared to pass the baton to the

Economic and Monetary Affairs Commissioner Olli Rehn said
recent EU actions provided a sound basis for further
stabilization steps by the central bank, and European
Commission President Jose Manuel Barroso said he was confident
the ECB would do whatever was needed.

“I’m sure the ECB is analyzing the current situation and
that it will take the decisions necessary to guarantee the
financial stability of the euro zone,” he said.

Markets are now waiting to see how ECB President
Jean-Claude Trichet will respond when he addresses the press
at 1330 GMT on Thursday. Those most bullish expect to hear
that the ECB will ramp up its government bond buying
programme, launched in May after Greece was bailed out.


But many market watchers expect no more than hints in that
direction, saying it is too soon for any conclusive
announcement given a fierce debate within the ECB about the
merits of such action.

Influential Bundesbank head Axel Weber has called for the
programme to be scrapped, and fellow ECB members have
criticized the U.S. Federal Reserve’s decision to buy $600
billion of U.S. debt.

“Thursday’s meeting could send the first signal that ECB
is on course for stepping up its purchase programme,” RBS
economist Jacques Cailloux said in a note to investors.

Yet ECB policymakers may feel under pressure to act
faster, given growing concerns that the crisis could spread
beyond Europe.

In Washington, the White House said President Barack Obama
was briefed regularly on developments in Europe, while a
senior Treasury official was heading to Berlin for talks on
the economic situation after meetings on Wednesday in Madrid.

“It’s important to the global economy and to our economic
recovery,” said White House spokesman Robert Gibbs. A senior
G20 source in Asia also told Reuters that deputy finance
ministers discussed the situation on Monday. [ID:nL3E6N109X].


A U.S. official also told Reuters that Washington would
support boosting an EU rescue facility via IMF funds, news
that bolstered the euro, helping it stabilize around $1.3130.

“It is up to the Europeans,” the U.S. official said. “We
will certainly support using the IMF in these circumstances.”

However, a Treasury Department spokesman later said: “an
extra commitment is not something we’re discussing right now.”
[ID:nWAT014766]. A Japanese government official also said
Tokyo believed the IMF had sufficient funds right now to deal
with the European crisis.

In recent days, economists have urged the ECB to tear up
its rule book and do all it can to protect the euro,
particularly since governments seem to be running out of ideas
how to restore confidence in their monetary union.

The premium investors demand to hold Portuguese
, Spanish and Italian
bonds instead of German benchmarks fell and European bank
stocks rebounded on Wednesday.

Markets in Asia followed with Japan’s Nikkei
scaling a five-month high and markets elsewhere in
Asia-Pacific climbing 1.3 percent.

Debt auctions in Portugal and Germany, however, showed
investors remain nervous. Lisbon’s borrowing costs surged in a
12-month bill auction and a German five-year note sale drew
the weakest demand in half a year. [ID:nLDE6B00ZR]

Citigroup’s chief economist said this week euro zone
turmoil might be the “opening act” of a global sovereign debt
crisis that could infect the United States and Japan.

EU plans to make private bond holders bear some of the
pain from any sovereign debt restructuring after mid-2013 have
led investors to reassess the risk of putting their money in
the government bonds of high-debt countries.

Euro zone officials have been admonishing markets for
doubting in the currency bloc’s ability to solve its problems,
but with no unity among European governments about what to do,
radical action by the ECB is among the few options

Germany has resisted pressure from France and others to
turn the euro zone into a “fiscal union,” a step that could
help the bloc address its economic imbalances but require
members to sacrifice sovereignty for the good of the group.

Chancellor Angela Merkel is also reluctant to top up EU’s
bailout funds at the expense of German taxpayers, while
Berlin’s partners are clamouring for more.

Portuguese Treasury Secretary Carlos Pina told Reuters the
EU needed to “deepen its budget and create a European
Treasury” to defend the euro, a move that would be anathema to
Berlin. [ID:nSLA1NE6JM]
(Writing by Tomasz Janowski; Editing by Kim Coghill)

($1=.7676 Euro)

WRAPUP 1-Markets pin hopes on ECB to ease Europe debt crisis