European Central Bank member Athanasios Orphanides said that the rescue fund set by EU-leaders in May, totaling $1.0 trillion, should purchase government bonds of countries indebted in Europe, while hinting that the bank may stop bond purchases.
Orphanides said to address market dysfunction that hampered the monetary transmission mechanism, adding that the European Financial Stability Facility were to buy government bonds, and that improved the functioning of the monetary policy transmission mechanism, that might render some of the ECB's non-standard measures no longer necessary.
EU leaders started a two-day meeting in Brussels today, in order to discuss the debt crisis and find a sufficient way to end the predicament. Speculations signal that EU leaders might expand the fund in response to ease market concern regarding the debt crisis.
I believe that that would be one way to have additional flexibility that at times might be found useful, to the extent euro-area governments improve the effectiveness of the stabilization facility and this relieves some market tensions, this would facilitate the ECB's task, Orphanides said.