July 23 (Bloomberg) -- Targeted asset purchases by the European Central Bank to combat deflation risks would pose difficulties in implementation, Andrew Bosomworth, Pacific Investment Management Co.’s Germany director, wrote in the Financial Times Deutschland.
Central bank purchases of government bonds in line with the ECB’s capital key would have limited effect, as about a quarter would be invested in German bunds, some of which already have negative yields, Bosomworth said.
Purchases of Spanish or Italian bonds alone, on the other hand, would confuse markets as to the ECB’s intentions, he said. Europe needs to have a discussion about how to implement such steps, either through the ECB or through the permanent bailout fund, Bosomworth added.
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