Similar spirals based on bond market fear of default earlier pushed Greece, Ireland and Portugal to seek bailouts. But Italy and Spain are considered too big to bail out.
In effect, by pushing for government policies in exchange for help, the ECB was taking on an enforcer’s role more typically played by the International Monetary Fund.
The bond purchases led to strife on the ECB board: Chief economist Juergen Stark is retiring in apparent disagreement, and Axel Weber, head of Germany’s Bundesbank, earlier this year abandoned a bid to succeed Mr. Trichet over disagreement with the board’s decision on bond purchases.
Mr. Trichet, whose position has less direct authority than that of the U.S. Federal Reserve chairman, has had to build consensus.
He steered a course between strict bailout opponents such as Mr. Stark and Mr. Weber, and outside economists who have urged him to buy the bonds by creating new money, a potentially unlimited source of financial firepower, but also potentially inflationary.
The ECB has refused, although the Fed and the Bank of England have done so.
Mr. Trichet’s own summing up in recent speeches focuses more on the bank upholding its mandate to keep inflation under control, as spelled out in the 1993 Maastricht Treaty that created the euro.
With the debt crisis, he said Tuesday before a European Parliament committee, “it is sometimes forgotten that our primary objective is to maintain price stability.”
“This is what the treaty demands from us. This is what the citizens of the euro area expect from us. And this is what we have delivered.”
He stressed one number: 2.01 percent, the annual inflation rate over the life of the euro despite sharply higher oil prices over the period. That is better, he says, than member states were able to achieve under their separate currencies over the previous 50 years.
Yet with the crisis now threatening the existence of the euro itself, the most intense discussion is now about the bank’s efforts to douse the crisis. Risks include potential losses on the $211 billion in government bonds it has bought, between $53 billion and $66 billion from Greece.
Analyst say the bank has the capital cushion to handle losses, but the more serious damage would be a dent in its reputation for well-thought out policies.
Commerzbank economist Michael Schubert said that if the bond program ends with losses from a default “then I think it will have an effect on their credibility.”
“It depends very much on what will happen. People will not think too badly about what the ECB has done regarding the bond purchases if, in the end, states will consolidate. Then they will say, ‘Oh, that was the right measure.’ ” Mr. Schubert said.
A bigger risk could be so-called moral hazard: the chance that governments will move more slowly to fix their finances, or that EU leaders will be more reluctant to take over the bailout burden, because they think the central bank will step in and rescue the situation.