(Reuters) - The ECB slashed purchases of government bonds to little more than half a billion euros in the run-up to last week's EU crisis summit, as it raised pressure on the bloc's leaders to tighten debt controls and cut spending further.

The European Central Bank remains at the centre of a fierce political tug-of-war, continuing with Germany's backing to resist calls from France and Italy - as well as the U.S., Britain and Russia - to escalate its response to the euro zone debt crisis by being more forceful in its bond buying.

But Monday's figures from the central bank showed it bought just 635 million euros worth of bonds last week, the lowest amount since resuming purchases in August and giving further evidence of its reluctance to buy down the borrowing costs of troubled euro zone members.

It inches the total the ECB has spent since starting the controversial program back in May 2010 up to 207.5 billion.(for full details click).

The sharp fall in purchases is the first major change in the ECB's bond buying tactics since Mario Draghi took over as president from Jean-Claude Trichet last month.

Last week Draghi dashed hopes the bank was gearing up to get more aggressive with its purchases, saying his comments the week before that if leaders agreed to more shared spending and debt rules further elements might follow, had been wrongly read as code for more bond buys.

The amount, which was well below the 4 billion euros expected by traders polled by Reuters, triggered an acceleration in the day's slide in the euro.

They are really stepping back it seems, but to be fair over the last couple of weeks the market sentiment has been very favorable and the market has done the work for the ECB, said Jens Sondergaard, an economist at Nomura in London.

The spreads have really come in but that was mainly because of the positive sentiment in the run-up to the summit so we will have to wait to see what happens next week, he said adding that he expected no major rebound.


Traders reported that the ECB was back in the market on Monday buying small amounts of Italian debt.

The ECB has capped the maximum purchase of euro zone sovereign bonds at 20 billion euros a week for now and is not considering bigger action in response to a decision at Friday's EU summit to create a fiscal union, ECB sources told Reuters on Friday.

The ECB and the 17 euro zone national central banks are buying the bonds under what it calls its Securities Markets Programme (SMP). It buys the bonds from banks and other investors on the secondary market as European laws forbid it from buying direct from the governments themselves.

It reactivated the program in August after a four-month break when Italy and Spain, two of the euro zone's biggest economies, began to be dragged into the debt crisis. Since then it has spent over 130 billion euros, averaging just over 8 billion euros a week.

Critics argue the purchases tread dangerously close to the ultimate ECB taboo of financing euro zone governments.

Juergen Stark, who is about to quit the bank over what sources say is his opposition to the SMP, said in an interview published on Monday that it was a matter of debate whether the buying had already overstepped the line of what the ECB should do.

The purchases are reported by the bank every week but take two to three days to settle, meaning that when it is buying, the figures do not necessarily give a full picture.

Also problematic is that it does not give a country-by-country breakdown of its purchases.

Analysts and traders estimate it has bought around 45 billion euros of Greek debt in total and has concentrated largely on Italian and Spanish debt since the August restart.

As usual the ECB will hold a 'sterilization' operation on Tuesday to neutralize the inflationary pressure the bond buys create. It does so by taking deposits from banks that when combined add up to the same amount it has spent on bonds.

Focus on the operation has intensified recently after the ECB failed to fully offset its buying late last month, raising questions whether the total is now so large that neutralizing purchases may become a more regular problem.