ECB could buy private sector bonds - Papademos

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ECB could buy private sector bonds - Papademos

UPDATE 1-ECB could buy private sector bonds - Papademos - Forbes.com

Quote:


BRUSSELS, March 26 (Reuters) - The European Central Bank could buy private sector bonds in a bid to boost liquidity in the face of a feared 'vicious circle' of negative effects, ECB Vice-President Lucas Papademos said on Thursday.

'It may be warranted that (the) central bank purchases private sector bonds to enhance liquidity,' Papademos told a business conference in Brussels.

'This is a possibility, it has to be kept in mind. No decision has been taken, but it is a possibility that could improve the markets,' he added.

The ECB was also looking at the possibility of helping the banking system by extending the maturity of liquidity operations.

So far it has resisted the kind of quantitative easing measures taken by its peers, including the U.S. Federal Reserve and the Bank of England.

In a speech text published on the ECB's website, Papademos said central banks around the world were taking unusual steps in trying to improve the flow of funds to the real economy.

'In the euro area, because the banking system has a more dominant role in the financing of the private sector than the capital market compared with other economies, the implementation of such measures would be more focused on the banking system,' he said.

Papademos said he feared a 'vicious circle' might take place in the economy. 

Will the EUR join the dead dance of USD, JPY, GBP, CHF ?

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