The European Central Bank said Thursday that it will almost double its capital base to euro10.76 billion ($14.3 billion) — money that will buttress its efforts to contain the continent's government debt crisis. The central bank, the monetary authority for the 16-nation eurozone, said that its euro 5 billion increase will come from eurozone national central banks, effective Dec. 29. The ECB has been playing a key role in Europe's efforts to ease debt market turmoil by buying bonds of various troubled governments.
By buying the bonds, the ECB has help calm market fear that was threatening to spread from bailed-out Ireland and Greece to other financially weak countries such as Spain and Portugal. The purchases have driven down interest yields that threatened to go so high the weak governments could no longer borrow.
An ECB statement didn't specifically mention the bond-buying program. It said the increase in capital "was deemed appropriate in view of increased volatility in foreign exchange rates, interest rates and gold prices as well as credit risk."
From a longer-term point of view, the increase "is also motivated by the need to provide an adequate capital base in a financial system that has grown considerably," the ECB said. Earlier this week, an official in Germany — which has the eurozone's biggest economy — said his country would be willing to help boost the ECB's capital base.
The move came as the continent's leaders headed into a summit on how to fight Europe's debt crisis.
The two-day EU meeting in Brussels wasn't expected to result in any new shock-and-awe decisions to contain the smoldering debt crisis. Instead it will focus on a small change to EU treaties to set up a new crisis mechanism agreed almost two months ago.
German Chancellor Angela Merkel insisted that in itself is a milestone.
"It is a very big step of solidarity among the euro states," Merkel said at a pre-summit meeting of Christian Democrat leaders.
"We are all seeking the same goal — namely to ensure a stable currency and a stable Europe," she said.
Still, the effects of the crisis have continued to echo across the continent.