December 4, 2017 / 4:48 PM / a year ago

UPDATE 1-Germany keeps falling behind in ECB bond buys

* ECB deviation from its capital key:

* (Writes through)

By Francesco Canepa

FRANKFURT, Dec 4 (Reuters) - The European Central Bank bought fewer German bonds than it should have for the eighth consecutive month in November, with France and Italy once again picking up the slack, data for the ECB’s stimulus programme showed on Monday.

The data provided further evidence that the ECB was spreading out its purchases of German debt under the 2.55 trillion euro ($3.02 trillion) scheme to avoid running out of paper to buy under the programme’s rules, which Germany does not want to relax.

These include a ban on owning more than a third of any country’s public debt, a limit that is looming large in Germany, where the government has been recording surpluses and therefore issuing less debt.

This could become an issue if the ECB decided to extend its bond purchases beyond their current end date in September 2018 - a prospect that Germany has been openly opposing.

At 11.562 billion euros, ECB purchases of German debt were nearly half a billion euros short of the country’s quota of the programme, or capital key, which depends on the size of its economy.

But the Bundesbank, which carries out the bulk of the ECB’s purchases of German government debt and has called for the programme to be stopped altogether, has said it has had no problem finding debt to buy and opposes changing the parameters of the scheme.

France and Italy each enjoyed purchases that were nearly a billion euros above their ‘capital key’ at 10.439 billion euros and 9.077 billion euros.

On a cumulative basis, Germany is still nearly 6 billion euros above its quota, but has been overtaken by Spain in that respect.

Smaller countries have fared far worse, with Portugal now 12 billion euros under its own capital key, followed by Baltic countries, Slovakia and Slovenia.

ECB President Mario Draghi has said any deviation from the capital key will be temporary and merely reflects market conditions. ($1 = 0.8437 euros) (Graphic by IFR)

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