In this article we will dive into the ECB announces €750 billion Pandemic Emergency Purchase Programme (PEPP)
Amidst Covid19, the ECB’s Governing Council has had to make a considerable amount of decisions to support and strengthen European countries and allow them to respond efficiently to the economic crisis that has been caused.
The first action undertook by the council was the temporary asset purchasing programme. This was related to both the private and public sector securities to prevent the potential serious risks to the monetary policy transmission and to safeguard the future of the Euro.
The PEPP which is the new Pandemic Emergency Purchase Programme has been allocated an overall amount of €750 billion. The purchases will all be conducted throughout the year 2020 and will include the Asset Purchase Programme (APP).
In the case of purchasing public sector securities, the allocation amounts will remain at the discretion of the central banks of each country. With that said, any new public sector securities purchase will fall under the new PEPP. The PEPP allows a certain level of flexibility, in the sense that it allows the purchasing to happen among jurisdictions, across multiple asset classes, and within a much more generous time frame. In the case of Greece for example, eligibility requirements have been waived for any nation wishing to purchase securities.
Within the Corporate Sector Purchase Program (CSSP), the ECB has increased the range of assets that are eligible for the program to include non-financial commercial papers.
Further to this, the ECB increased the scope of its Additional Credit Claims (ACC), which now includes all claims related to corporate sector financing. This enables parties to make full use of the Eurosystem’s refinancing services.
The ECB’s Governing Council is committed to playing a significant role in supporting all citizens of the euro area through this challenging time. The ECB will ensure that all sectors of the economy may benefit from supportive financing conditions, which include families, banks, firms, and governments.
The Governing Council has insisted that it will do everything within its power to be of help through this difficult time. This includes being fully prepared to increase the size of the asset purchase programmes and adjust their composition, by as much as necessary and for as long as needed. Furthermore, it will explore all options and contingencies to support the economy through this uncertain period.
The Governing Council will reassess and terminate net asset purchases under the new PEPP when it is deemed that the Covid -19 crisis is over. In any case, the council stated that the PEPP will remain intact for 2020. The ECB is therefore adamant that it will not take risks in relation to its monetary policy or put unnecessary stress on the eurozone in any way.