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Sunday 3 December 2023 Dublin: 0°C
CHRISTIAN LUTZ/AP/Press Association Images European Central Bank president, Jean Claude Trichet
Euro Crisis

ECB expected to announce new debt-crisis measures

Speculation is growing that the European Central Bank may increase its bond-buying programme in an attempt to fortify the eurozone.

THE EUROPEAN CENTRAL Bank is expected to announce new measures to tackle the euro crisis following a meeting of policymakers in Frankfurt later today.

Speculation that the ECB will introduce solid measures to address the crisis caused the euro to stabilise and also lifted stock markets yesterday. Anticipation is growing that president Jean-Claude Trichet may announce the ECB is to increase its bond-buying programme.

If the ECB did increase its purchase of sovereign debt it would mark a meaningful change in policy in Europe: The ECB has until this point restricted the buying of bonds over fears of inflation. In contrast, both the Bank of England and the US Federal Reserve have bought large amounts of their countries’ sovereign debt, RTÉ reports.

However, some analysts  have warned that there is major scope for disappointment, as many doubt the ECB is likely to expand its bond purchase program at this stage.

Reuters reports that Societe Generale analysts have said they believe the ECB needs to announce a plan of 1 trillion euros – or more –  over the coming quarters but are doubtful that this will happen soon.

The ECB is already buying euro zone government bonds but analysts do not accept that its programme goes far enough, saying that the ECB needs to present a “concrete” plan to build confidence:

“[The ECB] doesn’t have a target as its bond purchases are not aimed at providing liquidity – unlike the Fed’s easing,” Seiya Nakajima, chief economist at Itochu Corp told Reuters, “Perhaps Trichet can say that its bond buying program will continue. But that doesn’t really break any new ground,” he added.

Speculation that the US might be planning to support an expansion of the euro-zone’s stability fund through the International Monetary Fund is also gaining pace.