FRANKFURT The European Central Bank spent a record 22 billion euros (19.3 billion pounds) on government debt last week, reactivating its controversial bond-buying plan to try to halt the spread of the euro zone debt crisis to Spain and Italy.
The amount bought, reported by the ECB on Monday, was the most the central bank has spent in any week since it began the programme in May last year, surpassing the 16.5 billion euros spent in the first week, when it targeted Greek bonds.
Victoria Cadman, an economist at Investec, said the ECB would need to be active in the bond market for a few weeks yet.
"The ECB is doing quite a lot to pop up Italy and Spain and help to push down their yields. The number is relatively big, but it is not enormous," she said.
The ECB reactivated the programme after leaving it dormant for 19 weeks, and despite opposition from a four-man group on its policymaking Governing Council, led by Germans Jens Weidmann and Juergen Stark.
The four dissenters were concerned about the ECB moving into the fiscal policy arena but the majority on the Governing Council felt obliged to act as euro zone governments had failed to come up with adequate plans to stem the spread of the crisis.
The dissenters' resistance was echoed by former ECB chief economist Otmar Issing, who told German television station ZDF: "This cannot be the task of a central bank. If it gets involved in political business, that endangers its independence."
The central bank began buying bonds again directly after a Governing Council meeting on August 4, ECB President Jean-Claude Trichet said, with traders saying it had been in the market for Irish and Portuguese bonds.
However, as the purchases take 2-3 days to settle, those transactions, as well as those made at the start of last week show up in the data published this Monday.
Last week, the ECB said it would "actively implement" the bond-buying programme to fight the debt crisis, signalling it would buy Spanish and Italian government bonds to halt financial market contagion.
French President Nicolas Sarkozy and German Chancellor Angela Merkel will discuss on Tuesday how to make the euro zone work more effectively amid persistent doubts in financial markets over Europe's ability to solve its debt crisis.
One of Germany's leading economic associations came out in favour of joint euro zone bond issuance on Monday, raising pressure on Merkel to consider bolder crisis steps ahead.
The ECB also said no bonds held under the programme matured last week. Thus, when rounded to the nearest half billion, the overall value of the purchases -- albeit not marked to market -- rose to 96 billion euros.
The ECB and the 17 euro zone national central banks can buy government and corporate bonds from banks and other investors under the programme, but not directly from governments.
As usual, the ECB will take one-week deposits from commercial banks on Tuesday to neutralise the monetary impact of the purchases and the inflationary pressure they create.
The ECB does not break down its bond purchases. However, bond market traders and analysts say, until last week, buying had been limited to Greek, Irish and Portuguese bonds and estimate that it holds around 45 billion euros of Greek debt.
(Reporting by Frankfurt newsroom; Editing by Catherine Evans)