Average monthly PEPP purchases were roughly equal in 2020 (€71 billion) and 2021 (€70 billion), but almost halved in 2022 (average January to March: €39 billion). Since then, a more steady decrease of net purchases took place, with a combined purchases reaching a minimum of €46 billion in February 2022. The data show a peak of interventions in June and July 2020 with a subsequent decline that was again slightly reversed in summer 2021. Figure 1 below plots the monthly flows of purchases under PSPP and PEPP. 2īy the end of March 2022, the Eurosystem’s cumulated net purchases of public sector securities through both programmes reached €4,340 billion. Moreover, the allocation of purchases across euro countries has to follow the ECB capital key more stringently for the PSPP, whereas the PEPP rules claim a larger margin of flexibility to match the asymmetry of the pandemic shock. The issue and issuer limits for the PSPP that define maximum thresholds for the purchases do not apply for the PEPP. For the PEPP, allocation rules are more flexible than for the PSPP. By the end of March 2022, the Eurosystem PEPP holdings of public sector securities amounted to €1,666 billion, which is 97% of all PEPP purchases. The PEPP has bought bonds from all euro members including Greece. In December 2021 the decision to discontinue net purchases at the end of March 2022 was reached, with the distinct option to reinvest maturing principal payments from securities purchased under the PEPP. Initially, it was set up with a target of €750 billion until the end of 2020, but the ECB Council increased the envelope in two steps: First in June 2020 to €1,350 billion and second in December 2020 to €1,850 billion. PEPP is an asset purchase program of private and public sector securities. PEPP: With the Pandemic Emergency Purchase Programme (PEPP), the Governing Council had added a second purchase program that complemented the ongoing APP with additional net purchases between March 2020 and March 2022. APP net purchases were on a downward path after March 2022, with €40 billion in April, €30 billion in May, and €20 billion in June. The PSPP purchased bonds from all euro members with the exception of Greece. By the end of March 2022, the cumulated PSPP net purchases of the Eurosystem reached €2,674 billion (of which €2,394 billion are national debt and €281 billion supranational). PSPP: The Public Sector Purchase Programme (PSPP) started in March 2015 as the most important component of the Asset Purchase Programme (APP) and continued until June 2022, with the exception of a pause in net purchases between January and October 2019. Some key details are summarized in the box below: For the new crisis programme Pandemic Emergency Purchase Programme the ECB Governing Council decided to allow greater flexibility, to handle asymmetric shocks in the Covid-19 crisis.
This key is calculated according to a country’s population and economic output, and determines the national central banks’ shares in the ECB. In the Public Sector Purchase Programme, the ECB capital key is considered a binding benchmark.
The Eurosystem until recently bought government bonds under two different programmes. The instruments of ECB Public Sector Purchases: A brief overview We examined how the ECBs public sector bond purchases have been allocated across the various euro countries in the past, to substantiate this debate on fiscal dominance, and the ECBs willingness to sway from its core goal of price stability. Within this context it is important to ask whether the ECB is equipped to juggle these opposing factors, while credibly committing to its main duty.
Meanwhile already highly indebted EU countries face additional risks from increasing bond spreads. This necessary discontinuation of net purchases is however potentially at odds with financing needs from newly emerged crises, such as the energy crisis due to Russia’s war on Ukraine. The ECB discontinued its net asset purchase programmes at the end of June, paving the way to increase interest rates in July to combat the high and persistent inflation.
0 kommentar(er)
