Tuesday

28th Mar 2017

ECB reshapes its bond-buying scheme

  • "What the central bank can do is to keep a steady hand," said ECB chief Draghi (c), deputy Vítor Constâncio (l) and media chief Christine Graeff (r). (Photo: ECB)

The European Central Bank (ECB) decided on Thursday (8 December) to extend its massive bond-buying scheme next year but at a slower pace, amid uncertainties following Brexit and the US election.

Under the scheme, also known as QE for quantitative easing, the ECB buys €80 billion of public and corporate bonds each month.

Dear EUobserver reader

Subscribe now for unrestricted access to EUobserver.

Sign up for 30 days' free trial, no obligation. Full subscription only 15 € / month or 150 € / year.

  1. Unlimited access on desktop and mobile
  2. All premium articles, analysis, commentary and investigations
  3. EUobserver archives

EUobserver is the only independent news media covering EU affairs in Brussels and all 28 member states.

♡ We value your support.

If you already have an account click here to login.

After the current programme ends in March, it will be extended until December but will be limited to €60 billion per month.

The ECB chief Mario Draghi said that QE remained "open-ended" and that it would be prolonged again "if necessary."

He added that "if the outlook becomes less favourable" or that inflation remains too low, the bank could also decide to increase the programme "in terms of size and/or duration."

When it was launched in March 2015, QE was at €60 billion a month. It was raised to €80 billion last March.

Draghi said that the objective was to "exert pressure on market prices to deliver exactly the degree of monetary accommodation that we want."

No concern on Italy

He denied that the decision was an equivalent of so-called tapering, a progressive phasing out of the QE programme.

The ECB, he insisted, wanted to "transmit a sense that the presence of the ECB on the markets will be there for a long time."

Draghi, a former head of Italy's central bank, was speaking for the first time since a failed constitutional referendum last Sunday raised concerns about a crisis of the country's indebted banking sector.

He tried to defuse concerns, saying that Italian banks' vulnerabilities "have been there for a long time."

He also said he was "confident that the [Italian] government knows what to do" and that problems "will be dealt with."

And added that he still expected the eurozone's growth to "proceed at a moderate but firming pace" and that it was "dampened by a sluggish pace of implementation of structural reforms and remaining balance sheet adjustments in a number of sectors."

'Steady hand'

In a jab at the European Commission, which defends a flexible reading of eurozone budget rules, the euro bank chief said that "full and consistent implementation of the Stability and Growth Pact over time and across countries remains crucial to ensure confidence in the fiscal framework."

He noted that there were "indications of a somewhat stronger global recovery," but that many uncertainties laid ahead, most of all after Brexit and the election of Donald Trump in the US.

"It is difficult to assess the effect of these big changes, like the radically new administration or even Brexit or even the outcome of the Italian referendum," he said, adding that "we'll see the consequences of these changes in the medium to long term."

"In all cases," he pointed out, "markets proved much more resilient than people had expected them to be."

The ECB chief, referring to elections in Netherlands, France and Germany, also noted that the coming year would bring new uncertainties in Europe.

"Much of this [uncertainty] is political," he noted. "Whether we can do something about that or not is an open question."

"What the central bank can do is to keep a steady hand."

ECB brushes off German criticism

"We obey the law, not the politicians," the president of the European Central Bank, Mario Draghi, said after German finance minister criticised its anti-inflation policies.

'Be patient,' ECB chief tells Germany

European Central Bank president Mario Draghi keeps interest rates low and answers German criticism by saying they were in everyone's interest.

Opinion

Audit the ECB

The European Central Bank's ultra easy monetary policy is not working, with greater transparency needed into the bank's decision-making process.

SMEs lack support in EU financial plan

The European Commission's plan for a capital markets union is said to be aimed at small and medium-sized enterprises, but many could end up being left out in the cold.

Stolen Russian billions ended up in EU states

Illicit money flowing out of Russia ended up in almost every single EU state, an investigation has found, posing questions on the integrity of Europe’s banking systems.

News in Brief

  1. EU court validates sanctions on Russia's Rosneft
  2. Luxembourg to team up with Ireland in Apple tax appeal
  3. EU majority against GM crops, but not enough to block them
  4. Turkish referendum voting starts in Europe
  5. Le Pen says she lacks election funds
  6. UN dinner for Cyprus leaders to restart stalled peace talks
  7. Nato moves summit forward so US can attend
  8. EU clears US chemical giants merger

Stakeholders' Highlights

  1. ACCAG20 Citizens Want 'Big Picture' Tax Policymaking, According to Global Survey
  2. Belgrade Security ForumCall for Papers: European Union as a Global Crisis Manager - Deadline 30 April
  3. European Gaming & Betting Association60 Years Rome Treaty – 60 Years Building an Internal Market
  4. Malta EU 2017New EU Rules to Prevent Terrorism and Give More Rights to Victims Approved
  5. European Jewish Congress"Extremists Still Have Ability and Motivation to Murder in Europe" Says EJC President
  6. European Gaming & Betting AssociationAudiovisual Media Services Directive to Exclude Minors from Gambling Ads
  7. ILGA-EuropeTime for a Reality Check on International Day for the Elimination of Racial Discrimination
  8. UNICEFHuman Cost to Refugee and Migrant Children Mounts Up One Year After EU-Turkey Deal
  9. Malta EU 2017Council Adopts New Rules to Improve Safety of Medical Devices
  10. Nordic Council of MinistersNordic Energy Research: How to Reach 100 Percent Renewable Energy
  11. Party of European SocialistsWe Must Renew Europe for All Europeans
  12. MEP Tomáš ZdechovskýThe European Commission Has Failed in Its Fight Against Food Waste