European Central Bank (ECB) could soon give in to pressure to print money to stop a worsening crisis of the sovereign debt in the euro area, believe analysts included in a Reuters poll, estimating at about 50% the probability that the ECB will adopt a policy of unconventional measures. The survey conducted this week among the 50 bond market analysts, in the U.S. and Europe, revealed a 48% probability for the ECB to resort to unconventional measures, as did the U.S. Federal Reserve and the Bank of England. Such a decision would mark a change of the current political controversy, in which bond purchases are sterilized by attracting liquidity from the banking system.
Among analysts who predicted such measures from the ECB, most believe that they will be taken before March of next year. ECB leadership has rejected international calls for a decisive intervention of the institution in strengthening of the euro area, but volatility in bond markets in recent weeks increased pressure for a stronger role of the monetary authority.
“At this point, only the ECB has the power to calm the tension in the short-term of financial markets, while governments from the periphery were expected to approve reforms of the monetary union”, said Thomas Costerg of Business Chartered Bank. Extending the debt crisis from the marginal states of the eurozone to the main economies increased pressure for a bolder action.
ECB chairman, Mario Draghi, said Friday that the institution contributes to economic stability while maintaining its independence. Draghi warned that there will be a huge social and economic impact if the central bank would lose credibility. ECB has been developing, since last year, a government bond purchase program to support the borrowing costs of the member states. To date, the bank bought bonds of 187 billion euros, but gave no sign that it would accelerate the purchase even if some big economies, like Italy, have borrowed at high interest rates.