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The euro zone periphery may see a return to the financial crisis similar to the one witnessed at the end of 2011 after the European Central Bank's decision to start tapering its bond buying program from April this year, one analyst told CNBC Tuesday. Peter Chatwell, head of rates strategy at Mizuho International, told CNBC that 2016 was very similar to 2011 in terms of the euro zone crisis that started after the ECB decided to take a step back. We started to see the ECB stepping back from policies that not only stimulated the economy "but were serving to help peripheral countries rather than forcing them to do the right thing on the structural side," Chatwell said.

ECB makes a hawkish turn

He, however, added that this was followed by a peripheral blow out in 2012. "So what investors did was take the opportunity of the ECB buying (bonds) to sell. International investors were selling (bonds) to the ECB and I fear that for the periphery this may well materialize again." Last month, the ECB announced a continuation of the bank's asset-buying program, although a reduced pace of purchases is set to start from April. Current bond purchases of 80 billion euros ($86 billion) a month were due to end in March 2017, but will now be extended until at least December 2017 and will be cut to 60 billion euros a month from April 2017, the bank said in a statement. Benchmark interest rates were left unchanged. Chatwell said the ECB is only buying bonds because they are targeting the inflation, which at the moment is below the central bank's target of 2 percent. "If we get a recovery in inflation, even if it is dominantly led in core countries, it is going to enable the ECB to say that they have met their mandate."



European Central Bank (ECB) President Mario Draghi Sean Gallup | Getty Images

He further explained that if there is recovery in inflation in core countries but the peripherals continue to lag then it could lead to another crisis. "If we start to see recovery in core inflation which can be led by wage increases in Germany, and the peripherals can continue to lag then that could mean the ECB could withdraw their stimulus meaning that markets trade on fundamentals and ultimately we get back into another crisis." The euro zone economy suffered the worst of the economic crisis at the end of 2009 when the peripheral member states of Greece, Spain, Ireland, Portugal and Cyprus struggled with refinancing their government debt without the assistance of third party financial institutions such as the ECB, the International Monetary Fund (IMF) and the European Financial Stability Facility (EFSF). The crisis shook investor confidence in euro zone economies and countries like Greece and Spain are still dealing with high levels of debt and unemployment. In July 2012, ECB president Mario Draghi, made the famous "whatever it takes" speech to save the euro.

