ECB may delay exit again as Irish rescue fails to stem crisis

The European Central Bank may have to delay its exit from emergency measures again as Ireland’s bailout fails to stem the region’s sovereign debt crisis.

Investors are dumping Spanish and Portuguese bonds on concern they will have to follow Ireland and Greece in asking for European Union bailouts, making it more difficult for the ECB to proceed with its withdrawal of liquidity support for banks. Some economists now doubt the ECB will be able to signal a move back to limited auctions of three-month loans, which they regard as the next likely step in the bank’s exit, when policy makers meet next week in Frankfurt.

 

“We can no longer be very categorical on this point given the engulfing crisis in the periphery and the desire of the ECB to avoid exacerbating it,” said Julian Callow, chief European economist at Barclays Capital in London.