ECB buys nearly two billion euros in government debt

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The European Central Bank revealed on Monday that it bought nearly two billion euros' worth of government debt last week as ECB president Jean-Claude Trichet urged eurozone members to bolster confidence in sound public finances.

The ECB said it purchased sovereign bonds worth 1.965 billion euros (2.6 billion dollars'), up markedly from the 1.35 billion euros it bought the previous week.

The amount did not include bond purchases made on Thursday and Friday however, when the central bank reportedly bought huge amounts.

It was still the highest level of purchases since the beginning of July, when weekly ECB purchases amounted to roughly four billion euros' worth of bonds issued for the most part by countries on the eurozone's rim.

Since the bank's Securities Markets Programme was launched in May during the Greek debt crisis, the ECB has bought government bonds worth a total of 69 billion euros.

In the programme's first week, the ECB bought bonds worth 16.5 billion euros but the amounts tapered off to zero in late October and early November.

The massive purchases helped ease some tension on government bond markets, with the interest rate for 10-year Greek bonds falling on Monday to 11.563 percent in afternoon trading from 11.632 percent at the close on Friday.

Yields on Italian, Irish, Portugal and Spain bonds all rose on Monday.

While it has agreed to cover market dysfunctions for the time being to ensure effective transmission of its monetary policies, the ECB has also urged EU leaders to work out an effective monitoring system for debt-laden governments.

Last week, Trichet pressed those governments again to "pursue ambitious and credible multi-year consolidation strategies and implement fully the planned corrective measures."

© 2010 AFP

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