ECB responds to COVID-19 outbreak

European Central Bank (ECB)  announced a new temporary asset purchase program worth €750 billion (around 6 percent of eurozone GDP) by the end of the year, or longer if necessary, in response to the COVID-19 outbreak.

All assets under APP (Asset Purchase Programs) will be included, and purchases will be carried out in a flexible way (i.e. it is possible to finance Italian debt in advance). The ECB also decided to extend the scope of eligible assets for non-financial corporate debt securities and to relax collateral standards to allow banks to raise funds for the majority of their assets, including corporate claims.


The Pandemic Emergency Purchase Program (PEPP) will be supplemented by monthly purchases of €20 billion QE (quantitative easing) and €120 billion announced last week so that the total amount of purchases for the remainder of the year will be €1.1 trillion, or over €110 billion in monthly asset purchases.

Of course, as part of its reinvestment program, the ECB will also continue to exchange maturing securities. Putting this in a historical context: QE's net monthly purchases peaked at around €85 billion in 2016. This will increase the entire APP stock, which has already accumulated €2.6 trillion assets, by 40 percent.

(WBJ)