The European Central Bank cannot intervene much more aggressively to tackle the euro zone debt crisis, three ECB policymakers from the bloc's core said on Thursday, pressing governments to act instead.
The ECB is under growing pressure from world leaders to do more to address the crisis which has now engulfed Italy, exacerbated by the prospect of a political vacuum after Prime Minister Silvio Berlusconi's impending departure.
Dutch central bank President Klaas Knot, a member of the ECB's 23-member policymaking Governing Council, led fresh ECB resistance.
We have gone pretty far in what we can do but there is not much more that can be expected from us, Knot told the Dutch parliament. It is now up to the governments ... to make sure the doubts about sustainability, about repayment of individual government debt are removed as quickly as possible.
A Bundesbank spokesman said separately that there had been no ECB crisis meeting on Wednesday or Thursday.
German government bonds pared earlier losses as hopes that the ECB may ramp up its response to the deepening crisis faded.
Knot's comments echoed a warning to European governments from German ECB policymaker Juergen Stark late on Wednesday not to rely on the bank's help.
Italian 10-year bond yields have shot past 7 percent -- the point at which Portugal and Ireland were forced seek bailouts -- despite ECB buying of the country's debt, making it clear that a bigger response is required.
The yields slipped back to just below 7 percent on Thursday but remained in dangerous territory, and with no agreement on how to scale up the euro zone's rescue fund, the ECB is the only plausible defender for now.
A euro zone official said the bloc was not making any plans to bail out Italy, which is deemed too big to save with the 440 billion euro (377 billion pound) European Financial Stability Facility. A second said the hope was that the ECB would be forced by the 'gravity' of the situation to act more forcefully.
Despite the intensification of the crisis, the ECB has not delivered the kind of 'shock and awe' intervention that could calm markets. The bank is reluctant to take more risk onto its books by buying more bonds from debt-laden euro zone countries.
The more risk we take on, the more difficult it will be to neutralise the effects from this money creation. Then we land at the quadrant where we would have put on the money printing press, Knot said.
To date, the ECB has distinguished itself from the U.S. Federal Reserve and the Bank of England by refraining from embarking on a policy of 'quantitative easing' -- code for printing more money.
Instead, the ECB sterilises -- or neutralises -- its bond buys by conducting weekly liquidity absorbing operations equal to the cumulative size of its debt purchases.
There are countries in Europe who have a less good experience with this. That is why we have included in the Maastricht Treaty that problems cannot be solved in this manner, Knot added.
In Germany, the legacy of hyperinflation in the 1920s has left people with a strong aversion to price rises. German policymakers are steadfastly opposed to the ECB engaging in quantitative easing for fear it could be inflationary.
Many in Germany also oppose the ECB's bond-buying programme, even if the purchases are sterilised, because they fear it takes the bank's focus away from its inflation-fighting mandate and into the realm of fiscal policy.
Bundesbank chief Axel Weber resigned earlier this year over the bond-buy programme and Stark is quitting early in what sources say is a protest at the plan.
Weber's successor, Jens Weidmann, also opposes the plan. Weidmann's deputy, Sabine Lautenschlaeger, echoed this sentiment on Thursday, saying monetary financing is not an option to solve the euro zone debt crisis because it would lead to a substantial loss of trust in the single European currency.
Monetary financing is forbidden for central banks (in the euro zone), she said.
Last week, the central bank upped its bond purchases to 9.52 billion euros, still well below the 22 billion it spent when it reactivated the programme in August, and not enough to relieve the pressure on Italy.
The situation is complicated because Italy's Mario Draghi has succeeded France's Jean-Claude Trichet at the ECB's helm and the new president does not want to be seen as going soft on his home country and jeopardising the bank's cherished independence.
Knot said other ECB policymakers shared his views.
Intervention only has a temporary and limited effect. That is also the feeling that dominates at the ECB, he said.
Another ECB policymaker, Executive Board member Peter Praet, said in comments distributed by the ECB on Thursday that it was not up to the bank to intervene in markets to address problems with a country's fiscal sustainability.
It's one thing to accept interventions to facilitate better transmission where there's a lot of noise in the market, Praet said in an online interview with Debating Europe.
It's another thing when there are fundamental doubts about the sustainability of some countries. Clearly, it is not the task of the central bank to intervene in the latter case, he said.
Stark said late on Wednesday that the ECB's independence would be at risk were it to lend governments support in dealing with the crisis.
We are not the lender of last resort (to governments) and I do not advise European governments to ask the ECB to become lender of last resort, Stark told a business conference.
(Additional reporting by Andreas Framke; Editing by Mike Peacock, Catherine Evans and Ruth Pitchford)