Analysts at Deutsche Bank AG believe that the European Central Bank has to join efforts with the euro zone’s commercial banks in order to combat the region’s debt crisis.

According to them, the ECB could encourage lenders to buy bonds of indebted nations – Spain, Italy, Portugal and Ireland. This may be achieved if the central bank limits collateral for 1-year central bank loans against a pledge of investment-grade sovereign papers rated less than AAA. As a result, banks won’t need to give more collateral in case the value of the risky bonds drops, so the lenders will become more eager to hold these debt securities.

The specialists note that the yields on the periphery debt seem to be quite attractive for investors. All that’s necessary is to grant the marker players more freedom.

Deutsche Bank’s offer would reduce pressure on the ECB that has purchased since May the bonds of suffering European economies by 69 billion euro. In addition, governments will be able to cut their budget deficits, while the plan won’t let them relax too much as the collateral would re-enter the market after a year.

The strategists note that the plan will be really effective if European governments, in their turn, will conduct long-term measures such as strengthening the rules for fiscal discipline in the euro-area and the ECB indicates it will raise in 2011 its benchmark interest rate from the record minimum of 1% if the euro area’s economy manages to hold such move.

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