The European Central Bank showed that its bond-buying programme is on life-support rather than dead as it spent a meagre 27 million euros on government bonds after a three-week pause, ECB data showed on Monday. Traders have said the ECB had stepped in to buy small amounts of Portuguese government bonds in secondary debt markets, halting a steep rise in the country's debt yields.
With record-high of 1.523 billion euros in bonds maturing, the total amount of the bonds the ECB has in its books under the programme which started in May 2010, fell to 218 billion. After flooding the banking system with more than a trillion euros in ultra-cheap 3-year loans over the past two months, the euro zone's debt markets have calmed and ECB President Mario Draghi said last week that now it was time for governments and banks to take action instead of waiting for ECB to implement new crisis-fighting measures.
The small purchases add to evidence that the ECB has little appetite to keep the programme going in a significant fashion. It seems unlikely, however, that it would be officially declared over. ECB Executive Board member Benoit Coeure said recently the programme will remain in place "for some time". The ECB's bond purchase programme has been controversial from the start and Greece's recent move to reduce its debt burden by asking its private creditors to forgo more than half of their investment validated some of the concerns critics have had. Among them was Juergen Stark, who quit the bank last year over the purchases, arguing they tread dangerously close to the ultimate ECB taboo of financing euro zone governments.