FRANKFURT, Sept 10: The European Central Bank winds down its contested SMP programme of buying bonds issued by eurozone nations to make way for a revamped version, known as OMT, in future, it said on Monday.

According to the data published on the bank’s website, the ECB did not buy any more sovereign bonds under the Securities Market Programme (SMP), which has lain dormant now since February. The ECB said it would conduct specific operations on Tuesday to reabsorb the 209 billion euros of liquidity it has injected into the system so far via the SMP.

This is to offset inflationary effects of those previous bond purchases. The ECB initially launched the programme in 2010, a move that helped debt-wracked eurozone countries that were finding it difficult to drum up financing in capital markets. But SMP was controversial from the start, with critics saying the ECB was overstepping its mandate in buying sovereign bonds on the secondary market.

Last week, to allay some of the criticism and weaknesses of the SMP, ECB chief Mario Draghi announced that a revamped scheme, called Outright Monetary Transactions or OMTs, would take its place. In contrast to the SMP, countries wishing to benefit from the OMTs would first have to apply for a bailout from one of the eurozone’s two rescue funds, he said.

And cash from those funds is to be conditional on governments meeting agreed reform targets. —AFP