European Central Bank continues buying, but until when?

The last count of the cost to be incurred to save the euro area has come from the immediate collapse, 22 billion euros. This is what the European Central Bank has spent the week ended August 9 last year for the purchase of government securities of euro area countries. The ECB has succeeded in its primary aim of calming the market, but the biggest question is whether and when the ECB will stop buying.

The ECB has so far purchased a lot. The Italian and Spanish titles in 10 years have yields that are about 5%, below the rate of 6% threat that sparked panic in early August. But the stakes are higher than before. The previous purchases were aimed at relatively small markets such as Greece, Ireland and Portugal. The ECB will need to spend more money to buy the Spanish and Italian titles.

It is not clear how the ECB can spend. In the worst case, the estimates of some analysts suggest several hundred billion euros. The real test for the European Central Bank could take place when Spain and Italy were to resume the sale of their debt in late August and early September. While the ECB is trying to finance purchases with the European Financial Stability Fund, may still be forced to support the market for longer and with greater quantities than they had expected.

Meanwhile, the clamor of bonds linked to euro area as a way out of this crisis is growing. Rescue operation for the ECB shows the need to find a solution that is permanent. Accumulate a growing number of bonds at the ECB will only el'EFSF that investors still lack confidence in the finances of the eurozone.

Posted in: Economy