EMERGENCY GOVERNMENT bond purchases by the European Central Bank remained close to zero last week, despite resurgent nervousness about the countries worst hit by this year’s crisis over euro zone public finances.

The ECB said yesterday it had bought just €10 million in bonds last week, scarcely higher than the €9 million purchased the previous week and an almost negligible sum compared with the billions spent in May.

By bringing its purchases to a near standstill, the ECB has underlined its confidence that the euro zone financial system is returning to more normal conditions. But that view has been challenged in the past few days, amid fears that a possible “double dip” global downturn would damage countries such as Greece and Spain. Highlighting the crucial support role still being played by the ECB, data from Portugal’s central bank showed the provision of ECB liquidity to the country’s banks rose more than a fifth between June and July.

Some traders also reported ECB action last week in Irish bond markets. Yesterday’s data only covered settled transactions – so some deals may only show up in figures released next week – but they suggested any intervention had been tiny. – (Copyright The Financial Times Limited 2010)