Summit boosts ECB's role

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Summit boosts ECB's role

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The role of the European Central Bank is key to curbing the threat from the debt crisis.

To keep some eurozone countries’ borrowing costs from rising to unsustainable levels the Bank has been buying their government bonds artificially stimulating demand.

Those purchases have been relatively modest, reportedly no more than 20 billion euros per week.

The ECB started with Irish, Greek and Portuguese bonds then added those of Spain and Italy which has pushed up the total to 207 billion euros since the buying programme started.

That is necessary because right now private investors think those bonds are too risky.

Analyst Robert Halver of Baader Bank said: “If politicians reach a convincing debt solution, investors should start buying government bonds on their own. Right now liquidity is missing and that can only come from the European Central Bank.”

One outcome of the summit is that the ECB will be put in change of the eurozone’s bailout funds.

The Bank’s Governing Council Member from Italy, Ignazio Visco, called that “big news” saying it should bring down borrowing costs.