Thursday

27th Apr 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.

Eurogroup makes 'progress' on Greek deal

Eurozone ministers endorsed an agreement in principle between the Greek government and its creditors over a new package of reforms. But talks on fiscal targets and debt could still block a final agreement.

New anti-trust complaint looms over Microsoft

At least three security software companies “met several times” with the European Commission to complain about Microsoft’s alleged abuse of its market position. A formal case could follow.

New anti-trust complaint looms over Microsoft

At least three security software companies “met several times” with the European Commission to complain about Microsoft’s alleged abuse of its market position. A formal case could follow.

Investigation

MEPs oppose EU agency to prevent Dieselgate II

The European Parliament said on Tuesday that there should be more EU oversight on how cars are approved, but stopped short of calling for an independent EU agency.

Stakeholders' Highlights

  1. UNICEFRace Against Time to Save Millions of Lives in Yemen
  2. Nordic Council of MinistersDeveloping Independent Russian-Language Media in the Baltic Countries
  3. Swedish EnterprisesReform of the European Electricity Market: Lessons from the Nordics, Brussels 2 May
  4. Malta EU 2017Green Light Given for New EU Regulation to Bolster External Border Checks
  5. Counter BalanceCall for EU Commission to Withdraw Support of Trans-Adriatic Pipeline
  6. ACCAEconomic Confidence at Highest Since 2015
  7. European Federation of Allergy and Airways60%-90% of Your Life Is Spent Indoors. How Does Poor Indoor Air Quality Affect You?
  8. European Gaming and Betting AssociationCJEU Confirms Obligation for a Transparent Licensing Process
  9. Nordic Council of MinistersNordic Region and the US: A Time of Warlike Rhetoric and Militarisation?
  10. European Free AllianceEFA MEPs Vote in Favor of European Parliament's Brexit Mandate
  11. Mission of China to the EUXinhua Insight: China to Open up Like Never Before
  12. World VisionViolence Becomes New Normal for Syrian Children

Latest News

  1. EU agency stuck with London rent bill
  2. EU anti-fraud office ditches Martin Schulz probe
  3. Commission launches bid to make Europe social
  4. MEPs act to strip Le Pen of immunity in fake jobs case
  5. EU starts legal action against Hungary
  6. Brexit is about Europe's future as well
  7. Power struggle in Greenland: Three reasons why the EU should care
  8. Nordic and Baltic countries step up digitalisation efforts