ECB government bond purchases slow to a trickle

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The European Central Bank said Monday it had bought significantly fewer government bonds last week, another sign that some key financial markets are beginning to stabilise.

The ECB purchased some 81 million euros (105 million dollars), continuing a downward trend since its controversial programme aimed at supporting financial markets began in May.

Bond purchases the week before amounted to 176 million euros.

Germany's ECB governing council member Axel Weber has warned that purchases of public debt -- normally outside the central bank's remit -- could fuel inflation by encouraging eurozone governments to take borrow more.

The ECB offsets its government bond purchases however, by taking in an equal amount of one-week deposits from commercial banks.

The lower amount suggests that financial markets have begun to operate more smoothly, allowing credit to flow again.

© 2010 AFP

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