FRANKFURT Feb 4 The European Central Bank would
need overt backing from the Bundesbank to consider ending the
operations that soak up money the ECB has spent on bonds issued
by struggling sovereign borrowers, news agency Bloomberg said on
Ending those sterilisation operations would inject about 175
billion euros of liquidity, which would help ease strains in
euro zone money markets.
Unnamed sources told Bloomberg that ECB President Mario
Draghi had said he would contemplate asking ECB policymakers to
halt the absorption of liquidity from the now-terminated
Securities Markets Programme (SMP) if the Bundesbank helped sell
the move to the German public.
Because the ECB has said it will keep the bonds it bought
under the SMP until maturity, it will be years before the
programme ceases to exist.
The ECB declined to comment on the Bloomberg report.
News agency Dow Jones said on Friday the Bundesbank would
favour ending the sterilisation operations.
In weekly transactions, the ECB takes deposits from banks to
offset its spending on the bonds, to ensure that bond purchases
would not trigger inflation.
In recent weeks, the ECB has failed to completely offset the
purchases. Last week, banks offered 151.2 billion euros, some 26
billion euros short of target.
The ECB revealed its SMP portfolio for the first time last
February, showing it had 99 billion euros of Italian bonds, 44
billion of Spanish, 31 billion of Greek, 22 billion of
Portuguese and 14 billion euros of Irish government debt.
(Reporting by Sakari Suoninen; Editing by John Stonestreet)