Draghi's remarks looked like a "strong hint" that the bank was considering reviving the bond purchases, said Jonathan Loynes of Capital Economics in London. But he doubted the bank would make any large scale purchases, "given the program's previous lack of activity."
"Indeed, the ECB may even be hoping — rather optimistically — that even the mere threat of action will be sufficient."
Any effort that appears to bail out governments, however, remains deeply controversial.
Many officials and economists, particularly in Germany, are wary of anything that resembles violating the European Union treaty's ban on financing governments. They are also concerned that rescue efforts from the central bank will simply take pressure off politicians in indebted countries from cutting spending and reforming labor markets.
The May 2010 effort to buy government bonds continued on-and-off until it was put on hold this March. It was criticized at launch by the then-head of Germany's Bundesbank, and member of the ECB governing board, Axel Weber. This criticism undermined any impression that everyone at ECB was fully behind the action. The bank also stressed that the purchases were limited, further curbing their impact on the bond market.
Another thorny problem is the terms the ECB insists on when it buys bonds. Earlier this year, when Greece was negotiating a bond repurchase program to avoid a chaotic default on its debt, the ECB said it should be paid back in full for its Greek bond holdings. That meant even bigger writedowns for private sector creditors, who had to bear all the losses. Investors will not want a repeat of that when it comes to Spain.
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