Wednesday

27th Jan 2021

ECB to begin €1 trillion stimulus next week

  • The European Central Bank will begin buying €60 billion of government bonds per month from 9 March (Photo: Valentina Pop)

The European Central Bank will start buying government bonds from next week as it seeks to speed up the eurozone’s stalling economic recovery.

The Frankfurt-based bank on Thursday (5 March) announced it would purchase €60 billion of bonds per month, with the programme set to run until September 2016.

Read and decide

Join EUobserver today

Become an expert on Europe

Get instant access to all articles — and 20 years of archives. 14-day free trial.

... or subscribe as a group

The decision to pump a total of €1.14 trillion into the eurozone economy was made in January.

Prices across the eurozone have now fallen for three consecutive months, raising the likelihood of a prolonged period of deflation.

ECB President Mario Draghi said the programme would remain until the bloc’s inflation rate is close to its 2 percent target rate.

Quantitative easing (QE) involves central banks buying up government bonds to inject more money into the system - a path trodden in recent years by the US Federal Reserve and the Bank of England in response to the 2008-9 financial crisis. The ECB hopes that putting new money into the financial system will stimulate economic demand.

Elsewhere, the ECB has raised its forecast for the eurozone economy’s growth rate to 1.5 percent for 2015, up from a 1 percent forecast in December last year.

The programme will allow the ECB to buy government bonds, although Draghi told reporters that it would only buy bonds with negative yields if yields are not lower than the deposit rate. This would currently only exclude two-year German government bonds.

“It looks as if at least the ECB is a strong believer in the positive economic impact of its own QE programme,” said ING chief economist Carsten Brzeski. The ECB’s was “much more upbeat than in previous months,” he added.

Since the announcement in January, the euro has fallen to its lowest rate against the US dollar since September 2003 and lost 8 percent of its value against the UK pound.

Meanwhile, the ECB increased its emergency lending facility to Greek banks by €500 million. Draghi told reporters that the ECB was prepared to make it easier for Greek lenders to access its funds once the Greek government returned to implementing the terms of its bailout programme.

"The lending to Greece today is 68 percent of the Greek GDP, which is the highest in the eurozone. In this sense one can really say that the ECB is the central bank of Greece," he said, adding that “the last thing one can say is that the ECB not supporting Greece".

On the eve of the meeting, Draghi and the ECB board received an open letter from former shareholders in the Bank of Cyprus angry that the ECB has propped up Greek banks while allowing Cypriot lenders to collapse.

The Mediterranean island’s second largest lender, Laiki bank, was wound up as part of the Cypriot bailout deal in 2013, while depositors to Laiki bank and the Bank of Cyprus were forced to incur losses of €4.2 billion.

The ECB also kept its headline interest rate unchanged at 0.05 percent.

ECB unveils €1.1 trillion stimulus

The European Central Bank will plough €1.1 trillion into the eurozone economy in a last-ditch attempt to breath life into the European economy.

Opinion

Migrants in Bosnia: a disaster foretold on EU doorstep

Ultimately, the European Pact on Migration and Asylum, only unveiled in September, risks reinforcing bottlenecks and misery at the borders, should be thoroughly amended before final agreement.

MEPs call for workers to have 'right to disconnect'

MEPs called for a new law guaranteeing workers can 'disconnect' outside work hours, without repercussion. But they also passed a last-minute amendment, calling on the commission to delay any legislation for three years.

Stakeholders' Highlights

  1. UNESDAEU Code of Conduct can showcase PPPs delivering healthier more sustainable society
  2. CESIKlaus Heeger and Romain Wolff re-elected Secretary General and President of independent trade unions in Europe (CESI)
  3. Nordic Council of MinistersWomen benefit in the digitalised labour market
  4. Nordic Council of MinistersReport: The prevalence of men who use internet forums characterised by misogyny
  5. Nordic Council of MinistersJoin the Nordic climate debate on 17 November!
  6. UNESDAMaking healthier diets the easy choice

Latest News

  1. Giuseppe Conte: scapegoat or Italy's most cunning politician?
  2. Borrell to meet Lavrov, while Navalny behind bars
  3. Too few central and eastern Europeans at top of EU
  4. Rift widens on 'returns' deadline in EU migration pact
  5. EU adds new 'dark red' zone to travel-restrictions map
  6. Migrants in Bosnia: a disaster foretold on EU doorstep
  7. Navalny protests sharpen EU sanctions talks
  8. Why Russia politics threaten European security

Join EUobserver

Support quality EU news

Join us