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A18 Economy & Business


BY GABI THESING AND SIMONEMEIER


The European Central Bank on


Thursday delayed its withdrawal of emergency liquidity measures and bought more government bonds as President Jean-Claude Trichet pledged to fight “acute” financialmarket tensions. TheECBwillofferbanksunlim-


ited loans through the first quar- ter over periods of seven days, one month and threemonths, Trichet


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told reporters at a news confer- ence inFrankfurt,Germany. The ECB met under pressure


from investors to stop the debt turmoil fromengulfing Spain, the euro zone’s fourth-largest econo- my,after the rescueof Irelandfour daysagodidnot convincemarkets that policymakers have the re- solve needed to contain it. Al- though Trichet signaled that the bond purchase program was “on- going,” he also said there’s a “clear need” for governments to fix their budgetdeficits.


“Uncertainty is elevated,” he


told reporters after the ECB’s gov- erning council left its benchmark interest rateat 1percent. “Wehave tensions andwehave totake them into account” Bonds issued by some of Eu-


rope’s most financially troubled governments recovered after Trichet’s remarks. The yield on Portugal’s 10-year government bond fell 0.55 percentage points, to5.85,while the yieldonIreland’s benchmark bond declined 0.36 percentagepoints, to 8.3.


Trichet’s comments mark a


shift from his stance last month, when he said that the ECB could start limiting access to its funds. The reversal isnothis first; earlier this year, after resisting demands to ease theGreek budget crisis, he toreuptheECB’s rulebook inMay by buying bonds ina decisionthat also split the council. Signaling disagreement within


the 22-member council, Trichet said Thursday that an “over- whelming majority” of officials backed the ECB’s Securities Mar-


ket Program and that a “consen- sus” supported maintaining the status quo on providing liquidity. Bond purchases will continue to beoffset tokeepthemoney supply unchanged, incontrast to theFed- eralReserve and the Bank of Eng- land,he said. Some strategists, however, said


theECB’s refusal to followthe Fed andtheBankofEnglandmaysoon endthe reboundinbonds. TheECBhasalreadysteppedup


its activity; lastweek it bought the most bonds in twomonths. Over-


FRIDAY, DECEMBER 3, 2010 European Central Bank buying government bonds, taking other steps to fight market tensions


all purchases nevertheless total $88 billion so far, well below the amounts bought by the Bank of EnglandandtheFed. Indicating that he thinks the


onus is on governments to tame markets, Trichet said there is a “clearneed” for themto“strength- enconfidence inpublic finances.” The ECB left unchanged its


forecast for economic growthnext year at about 1.4 percent, while raising its estimate for inflationto about1.8percent, from1.7percent. —BloombergNews


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