ECB operation suggests state bond purchases have halted

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The European Central Bank said Tuesday it had drained 60 billion euros (77 billion dollars) from the eurozone money market in an operation that suggested ECB purchases of public debt have stopped, for now at least.

The ECB has pledged to take in the same amount it spends in secondary markets for government bonds in the form of one-week deposits from commercial banks.

The amount announced Tuesday matched that of a week earlier.

On July 9, ECB chief economist Juergen Stark told reporters: "If the situation (in financial markets) improves further, there is not a reason anymore to continue with this program."

He referred to the bank's controversial Securities Markets Programme, under which it has purchased government debt to keep financial markets functioning smoothly.

German members of the ECB's governing council in particular, including Stark, say such purchases do not fall under the central bank's mandate and should be as limited as possible.

ECB president Jean-Claude Trichet has also stressed the measure's "temporary" nature.

© 2010 AFP

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