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European Central Bank program grinds to a halt

LONDON — The European Central Bank said Monday it did not buy up any government bonds last week, effectively pausing one of Europe’s biggest tools to fight the debt crisis, as market tensions have eased since the start of the year.

LONDON — The European Central Bank said Monday it did not buy up any government bonds last week, effectively pausing one of Europe’s biggest tools to fight the debt crisis, as market tensions have eased since the start of the year.

In a statement, the central bank said it did not add to its previous bond purchases in the week to Jan 28., leaving the overall amount it has bought since the program’s start in May at C76.5 billion ($105 billion).

Just two weeks ago, the ECB had splashed out over C2.3 billion, propping up the bond markets in Europe’s more indebted countries. Many in the markets believed that Portugal was just days away from joining Greece and Ireland in having to get a bailout from its partners in the European Union and the International Monetary Fund.

Since then, the markets have become increasingly confident that EU policymakers have finally gotten a handle on the debt crisis and are preparing a comprehensive policy solution.

Proposals being floated include an increase in the size and scope of Europe’s bailout fund, the so-called European Financial Stability Facility. As well as actually having more money at its disposal, there is a growing expectation that Europe’s core countries, like Germany and France, will allow the EFSF to buy back bonds directly in the markets and reduce the interest payments that bailed-out countries will have to pay.

Though such proposals have given the euro much-needed respite, there are many analysts who think that they will not be able to stop Europe’s debt crisis from worsening, especially as many countries face years of tepid growth as governments continue to slash spending and raise taxes to get public finances into shape.

The ECB’s governing council is expected to keep its main interest rate unchanged at a record low of 1 per cent on Thursday. Inflation concerns are likely to feature heavily at the monthly meeting.