The vice-president of the European Central Bank (ECB), Lucas Papademos, recently said at the European Business Summit in Brussels that the ECB was actively considering a programme to start buying European corporate debt in a bid to get the market flowing again.

Such a move, known as quantitative easing, would help SMEs and larger European companies who are currently finding it difficult to fund further investment. The US Federal Reserve, the Bank of England, the Bank of Japan and the Swiss National Bank have all adopted varying policies of quantitative easing in recent months to fight the current financial crisis.

However the policy of buying corporate bonds is more problematic in the EU as member states are likely to compete over which companies should receive the funds. Papademos also indicated that the ECB was considering lengthening its lending period to other banks.

In addition, Papademos pointed out that since the crisis had started the ECB has pumped huge amounts of liquidity into the financial sector in the form of loans in an attempt to unblock lending. As a result, the ECB’s balance sheet has increased by 70%.