The ECB is caught in the middle. Most of the states in the European Union want it to be active. They are counting on it to solve the European debt crisis by rate cuts, extensive lending, and large scale asset purchases. They want the ECB to refinance European banks.
On the other hand German members of the ECB didn’t back its move to buy bonds. They complain that buying bonds blurs the line between monetary and fiscal policy. They also point out that it hasn’t worked to solve the crisis so far.
Being partly a political creation, the ECB strives to please all the member states. It started to buy bonds last year and accelerated the process this year. But lately it’s been cutting back last week. It purchased only 4 billion euros in government bonds last week, down from 10 billion the previous week. That is the lowest total since it resumed its controversial bond buying 7 weeks ago.
What it does next depends upon European politics pure and simple. Will the Wolfgang Schauble clones win out with their strict interpretation of a fiscal union or will the Trichet nuts prevail with their ideas about a United States of Europe and an ECB with the powers of the Fed?