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ECB bond buys grind to halt after Weber outburst

FRANKFURT, Oct 18 (Reuters) - The European Central Bank’s government bond purchases ground to a halt last week, figures on Monday showed, after policymaker Axel Weber renewed his fierce criticism of the programme and called for it to be abolished.

It is the first time since the controversial programme was introduced in May that the ECB has bought nothing and keeps the total spent to 63.5 billion euros. ^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^

For a graph of bond purchases click: r.reuters.com/zeq88n For a graph of bond spreads click: here ^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^

The ECB can buy government and corporate bonds under the programme, but has given no further details, such as how much it could spend or how long it intends to buy bonds.

Buying has also been erratic. Having spent 16.5 billion euros in the first week of the programme, purchases slowed to a trickle by early August only to increase amid renewed fears about the finances of Ireland and Portugal.

ECB and Bundesbank heavyweight Axel Weber issued a stinging criticism of the purchases last week, saying they had not calmed debt markets as intended and should be phased out permanently. (for story click [ID:nLDE69B266])

But the bank’s President Jean-Claude Trichet took issue with the comments in an interview published on Sunday, saying Weber’s outburst did not represent the ECB’s view. [ID:nSGE69G00A]

The bank stresses the purchases are designed to tackle dysfunctioning bond markets.

It will take one-week deposits from commercial banks on Tuesday to neutralise the extra liquidity and inflationary impact of the purchases, a step it takes on a weekly basis.

The actual purchase amount could be higher than the reported total, given it takes 2-3 days for purchases to settle. For full details click Reuters information page ECB35. (Reporting by Marc Jones)

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