The European Central Bank’s crisis-fighting measures hit an unexpected snag with the surprise flop of “sterilising” operations to counter the inflationary impact of its €76.5bn outstanding eurozone government bond purchases. Tuesday’s operations flopped because overnight market interest rates were higher than the maximum 1 per cent the ECB was prepared to pay – making its offer unattractive to many banks.

To counter inflation, the ECB has sought to withdraw amounts equivalent to the stock of bonds from the financial markets – allowing Jean-Claude Trichet, ECB president, to argue that the programme was different from US-style “quantitative easing” aimed at boosting the economy. The sterilising operations have been largely symbolic because the ECB has continued to meet in full eurozone banks’ demands for liquidity. Read more