Although the European Central Bank's (ECB) bond-buying operation came to a halt last week, it is likely to keep the program open as a direct means to intervene in the sovereign debt market, a senior economist said on Wednesday.

In an interview with Xinhua, Christian Schulz, a senior economist with the London branch of Berenberg bank, said the suspension of bond purchasing operations was justified because markets are functioning well and the funding situation of European banks had improved.

"The question is why the Securities Markets Program (SMP) has still been going on for so long," said Schulz.

On Monday, the ECB reported it did not buy any bonds on the market last week. This follows a sharp decrease in the amount of bonds it purchased during the three weeks starting from Jan. 23. In the week from Feb. 7 to 13, the ECB bought a mere 59 million euros of bonds.

Through the SMP, the ECB has 219.5 billion euros of bonds since the controversial program began on May 10, 2010. Those who opposed the program like Juergen Stark tendered his resignation as the ECB's chief economist last September.

However, Schulz said the ECB is unlikely to formally put an end to the program.

"We saw last year when the ECB stopped purchasing bonds, tensions on the market returned quickly," he said.

"They will keep the program open so that if we get another market panic on any European markets, they can quickly return to purchasing," he added.

According to Schulz, the three-year longer-term refinancing operation (LTRO) conducted by the ECB in December also helped bring the bond yields down. The LTRO works indirectly via banks and works well on small bond markets, he said.

However, the ECB should still retain a direct means to intervene in markets, namely the SMP.

Schulz pointed out that there are two developments that will determine the size of the second three-year LTRO. While the recent extension of eligible collateral for the second tender will make it easier for some eurozone banks to borrow from the ECB, other banks simply don't need ECB money anymore due to surging market confidence.

He expects the size of the second three-year LTRO, which will be conducted by the ECB at the end of this month, will approximately be the same size as of that in December.

On the balance, it might be 400 to 500 billion euros, he said. "My interpretation would be: the lower the amount, the better, because that would signal that banks are confident that they don't need ECB funding any more."

Recently, pressure has been mounting on the ECB, which has been lobbied to forego profits on its Greek bonds. Asked how the ECB would contribute to the second bailout of Greece, Schulz said state financing is illegal for the ECB which is why it has been difficult for it to intervene and end the financial crisis.

However, he noted that the ECB can pass on the profits to the shareholders and it will be up to the governments, also shareholders of the ECB, to decide whether they will forego profits on Greek bonds.