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Yahoo! My Yahoo! Mail More Yahoo! Services Account Options New User? Sign Up Sign In Help Yahoo! Search web search Home Singapore Asia Pacific World Business Entertainment Sports Technology Weekend Edition Top Stories Most Popular Photos Full Coverage Sitemap Eurozone braces for radical ECB liquidity move AFP - 1 hour 58 minutes ago Send IM Story Print Eurozone braces for radical ECB liquidity move FRANKFURT (AFP) - – Financial markets braced Thursday for a European Central Bank meeting amid speculation it will announce dramatic action to tame a eurozone debt crisis which has claimed Ireland as its latest victim. Analysts said many in the markets think the ECB could decide to maintain or even boost its supply of cheap funding for the banks rather than begin to rein in a key stimulus measure, as it expected to do earlier. Rumours said that "the ECB will announce some big and bold moves on its government bond purchase (liquidity) programme," UniCredit fixed income strategist Luca Cazzulani told AFP. While the bank's main interest rate was expected to remain at a record low of 1.0 percent, ECB president Jean-Claude Trichet might tell media the bank would substantially increase purchases of eurozone government bonds, he added. The Irish debt crisis has probably blown the central bank off its course of edging towards more normal monetary policies, other analysts agreed. Under a controversial Securities Markets Programme that has divided the bank's governing council, the ECB has bought nearly 70 billion euros (90 billion dollars) worth of government bonds since May to help the banks provide credit to keep the economy turning. Some analysts say the ECB could now pull out the stops and send the total soaring to between one and two trillion euros to keep a festering debt crisis from spreading to major economies like Italy and Spain. Such a move would present ECB policymakers with a major dilemma however, the UniCredit strategist noted. "The problem with buying large amounts of debt is that it would become very difficult to sterilize them," he said, as the ECB currently does by taking an equivalent sum in short-term deposits from commercial banks as an offset. "If they dont sterilize it it will be politically unacceptable for some EU countries" which fear inflation could take hold in the 16-nation eurozone. Buying government debt without offsetting the operations amounts to creating money and as the money supply increases so does the risk of inflation, which would raise hackles in eurozone heavyweight Germany. The ECB is mandated moreover to keep eurozone inflation below but close to two percent, essentially the level it stood at in November. If inflation were to begin to rise, the ECB would have to tighten monetary policy, which could choke weaker economies struggling to grow so they can cut public deficits and reduce debt. "The ECB will need to continue to provide exceptional support," ABN-Amro analysts wrote in a research note. RBS economist Jacques Cailloux said it was important that the ECB delivered a forceful message Thursday "and signals that it stands ready to intervene at any point to ensure financial stability in the region." But the central bank is believed to worry that governments and commercial bank directors now depend on its exceptional measures for what some call 'zombie banks' -- those which could not survive otherwise. In taking on problems faced by major Irish banks, Dublin dug itself a hole that forced it last week to agree an 85-billion-euro bailout with the European Union and the International Monetary Fund. Government bond markets that raised pressure first on Greece and then on Ireland are also focusing on Belgium and Portugal, and on Italy and Spain, the third- and fourth-biggest economies in the 16-nation eurozone. Cazzulani did not expect the ECB to say how much it would spend on bond purchases which the bank says are needed to keep markets running smoothly. But he said the total eurozone governement bond market is worth around 5.5 trillion euros and that it would take about one trillion euros to buy "a relevant share of Spanish and Italian debt." Meanwhile, the ECB is also to present new staff forecasts for growth and inflation on Thursday. In September it estimated 2010 growth at 1.6 percent, followed by 1.4 percent next year. Inflation was tipped to come in at 1.6 percent this year before edging up to 1.7 percent in 2011. Recommend Send IM Story Print News Search Top Stories FA condemn pitch invasion on eve of 2018 vote Eurozone braces for radical ECB liquidity move 'Critical safety issue' with Rolls A380 engine Fed lifts lid on crisis lending to non-US banks Obama reverses oil drill expansion after BP spill More Top Stories » ADVERTISEMENT Most Popular Most Viewed Most Recommended Finger length predicts prostate cancer risk: study 'Sarkozy the American' mulled troops for Iraq: WikiLeaks Eurozone debt crisis deepens Complacency fuels new AIDS surge in West: UN Euro recovers -- but fears of Portugal bailout More Most Viewed » 'Naked' airport scanners may be 'dangerous' Pilgrims stone 'devil' as Muslims celebrate Eid World leaders scramble for funds to save the tiger US, S.Korea plan war games after N.Korean attack Obama gets 12 stitches after 'elbow in the lip' More Most Recommended » Elsewhere on Yahoo! 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