Eurosystem security purchase programs

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The Eurosystem's security purchase programs are measures led by the European Central Bank (ECB) to support lending in the euro area and increase inflation . They were started in the course of the financial crisis from 2007 and the euro crisis and include the purchase of interest-bearing securities from public and private issuers by the Eurosystem , i.e. by the national central banks of the Eurozone and the ECB. These measures are politically and scientifically controversial. In May 2020, fromFederal Constitutional Court classified one of the measures as “incompetent” due to a lack of proportionality checks.

Pfandbrief purchases from 2009 to 2012

In July 2009, the ECB launched an initial program to buy Pfandbriefe ( covered bond purchase program , CBPP) in order to support the Pfandbrief market, which was badly affected by the financial crisis. By June 2010, the Eurosystem had acquired securities worth 60 billion euros. In a second program from November 2011 to October 2012 (CBPP2) , Pfandbriefe with a volume of 16.4 billion euros were purchased.

The securities are to be held until final maturity . In September 2016, Pfandbriefe worth around 24 billion euros from the CBPP and CBPP2 programs were still in the Eurosystem's portfolio.

Government bond purchases from 2010 to 2012

In May 2010, the Eurosystem began buying government bonds ( security markets program , SMP) on the secondary market . The purchases were concentrated in countries such as Greece , Portugal and Italy , which were particularly hard hit by the euro crisis . By September 2012, approximately 210 billion euros in securities had been acquired.

The purchases were initially sterilized , that is, money pumped into the market was withdrawn elsewhere in order to prevent the money supply from expanding . In view of the low inflation in the euro area, the ECB decided in 2014 to abandon sterilization and leave the remaining volume of around 165 billion euros in the market. This subsequently turned the SPP program into a quantitative easing .

Outright monetary transactions

With the conclusion of the first government bond purchase program (SMP) and during a renewed escalation of the euro crisis, the ECB introduced a measure called Outright Monetary Transactions (OMTs) in September 2012 . This enables individual states to have government bond purchases carried out via the secondary market in parallel to the activation of the European Stability Mechanism .

The OMT program has not yet been used by any state (as of August 2016). However, market observers assume that the announcement alone had a calming, interest-rate lowering effect on the financial markets.

Extended security purchase program

The first series of purchase programs in the years 2009 to 2012 was followed by a second from autumn 2014, which the ECB calls the expanded asset purchase program (EAPP; literally: extended asset purchase program). As of March 2015, the EAPP had a total monthly volume of 60 billion euros and should initially run until at least September 2016. In December 2015, the ECB extended it to at least March 2017, and in April 2016 it increased the purchase volume to 80 billion euros per month.

So far, the EAPP comprises four individual programs:

Pfandbrief purchases since 2014

A third Pfandbrief purchase program (CBPP3) started in October 2014 . It allows the ECB to hold up to 70 percent of individual securities. In September 2016, the Eurosystem held Pfandbriefe worth around 191 billion euros from this program.

ABS purchases since 2014

Since November 2014, the Euro system buys within the ABSPP also anticipated from asset-backed securities ( asset backed securities , ABS). The stock from this program amounted to 20 billion euros in September 2016.

Government bond purchases since 2015

In March 2015, the Eurosystem started a large-scale purchase of European government bonds ( public sector purchase program , PSPP). In contrast to the SPP program from 2010 to 2012, the national central banks only buy bonds from their own state from the PSPP in order to dispel concerns about illegal monetary state financing . In addition, a fixed allocation key was introduced for the individual euro countries, which is based on their share in the ECB's capital. Accordingly, the largest volume is attributable to German bonds, the second largest to French, the third largest to Italian, etc. The Eurosystem's share of the total amount of individual securities was limited to 25 percent (so-called “ ISIN limit”) and the share of a state's debt to 33 percent. In September 2015 the ECB increased the ISIN limit from 25 to 33 percent. The yield on the bonds purchased must be above the deposit rate of the ECB.

By the beginning of September 2016, securities worth around 1,000 billion euros had been acquired as part of this program. The prices of European government bonds rose sharply during this period and interest rates fell accordingly to historic lows. The current yield on German government bonds fell into negative territory ; H. on average, the state no longer has to pay interest on newly issued bonds, but generates a profit with the debt.

Buying corporate bonds since 2016

Since June 2016, the Eurosystem has also been purchasing corporate bonds from issuers in the euro zone. In contrast to buying government bonds, which is done via the secondary market to avoid direct government financing , the central banks can also buy or subscribe to corporate bonds directly from the issuer .

In September 2016, the Eurosystem's holdings of corporate bonds from these purchases amounted to € 20.5 billion. The current yield on German corporate bonds fell from around 2.0 to 1.6 percent between June and August 2016.

Pandemic Emergency Purchase Program since March 2020

At the end of March 2020, the ECB began buying bonds from public and private borrowers in response to the COVID-19 pandemic . Up to 750 billion euros are to be used for this by the end of 2020.

Unofficial security purchases by national central banks

Die Welt am Sonntag reported in November 2015 on "secret" purchases of securities by the central banks of France, Italy and other countries. In the period from 2006 to 2012, according to calculations by the financial scientist Daniel Hoffmann (as part of his dissertation ), they should have amounted to at least 510 billion euros, significantly more than the amount of the official purchase programs.

Share purchases

The supply of suitable government bonds that can be bought by the Eurosystem is limited, and the target of inflation of close to two percent has not yet been achieved. In the summer of 2016, various market observers therefore discussed a possible expansion of the purchase programs to include shares or listed equity funds , as has been the case in Japan for a long time.

Decision of the Federal Constitutional Court of May 5, 2020

The Federal Constitutional Court declared the government bond purchase program (PSPP) of the ECB - contrary to the opinion of the European Court of Justice - to be incompetent in May 2020. In the opinion of the Federal Constitutional Court, the program touches the limits of the overall budgetary responsibility of the German Bundestag . Both the program of the ECB and the decision of the ECJ in the referral procedure would therefore be ultra vires acts that are no longer compatible with the Basic Law. The Federal Constitutional Court complained that the ECJ and the ECB had not carried out a proportionality test between the monetary and economic policy effects of the program. The German constitutional organs are therefore obliged to oppose the PSPP. The Bundesbank is no longer allowed to participate in the program three months after the ruling has been pronounced unless the Governing Council of the ECB clearly demonstrates in a new resolution within this period that the monetary policy objectives pursued by the PSPP are not disproportionate to the economic ones - and fiscal policy implications.

The BVerfG sees the main problem in the fact that the Eurosystem becomes more dependent on the policies of the member states as the program expires and the total volume increases, since the PSPP significantly improves the refinancing conditions of the member states and thus has a significant impact on the fiscal policy framework in the member states impact. In addition, strong economic and social effects on citizens, such as shareholders, tenants, property owners, savers and policyholders, can be seen. This would result in significant risk of loss for savings assets, for example. In addition, companies that are no longer economically viable would continue to remain on the market due to the lower general interest rate level as a result of the PSPP (“ zombification ”).

Following the decision of the BVerfG, the EU Commission announced that it would examine infringement proceedings against Germany. In June 2021, the EU Commission announced that it had initiated the procedure.

Web links

Individual evidence

  1. ↑ a b Markus Sehl: BVerfG: ECB decisions contrary to competency. In: Legal Tribune Online . May 5, 2020, accessed May 5, 2020 .
  2. ^ A b Corinna Budras, Christian Siedenbiedel: After the decision: What the verdict on the ECB purchase program means . In: FAZ.NET . ISSN  0174-4909 ( faz.net [accessed May 6, 2020]).
  3. ↑ Additional liquidity for the financial system: 60 billion euros for Pfandbriefe , Handelsblatt, June 5, 2009.
  4. ↑ Covered bond purchase program completed , ECB press release of June 30, 2010.
  5. ↑ a b c d e Consolidated financial statements of the Eurosystem as of September 2, 2016 , ECB, September 6, 2016.
  6. ↑ ECB buys government bonds for 22 billion euros , FAZ.NET, August 15, 2011.
  7. ^ European Central Bank: Summary of ad hoc communication. Related to monetary policy implementation issued by the ECB since January 1, 2007. Online , accessed September 7, 2012.
  8. ↑ ECB ends sterilization of its government bond purchases , Deutsche MittelstandsNachrichten, June 5, 2014.
  9. ↑ Technical features of Outright Monetary Transactions , ECB, September 6, 2012.
  10. ↑ For details, see the section “Effects on government bond interest”. See also Peter Spiegel and Michael Steen: Fears ECB bond scheme has its weakness. In: Financial Times (FT.com). February 26, 2013, accessed April 12, 2015; Bench press. In: The Economist. (On-line). June 8, 2013, accessed April 12, 2015.
  11. ↑ a b Asset purchase programs , ECB, accessed on August 27, 2016.
  12. ↑ a b c More details on the public sector purchase program (PSPP) - Questions & answers , ECB, June 2, 2016.
  13. ↑ a b Buying government bonds: ECB floods markets with 60 billion euros per month , Spiegel Online, January 22, 2015.
  14. ↑ The ECB falls short of expectations , FAZ.NET, December 3, 2015.
  15. ↑ Central bank slows bond purchases , Handelsblatt, May 2, 2016.
  16. ↑ DECISION OF THE EUROPEAN CENTRAL BANK of 15 October 2014 on the implementation of the third covered bond purchase program , Office Journal of the European Union, 22 November 2011.
  17. ↑ Asset-backed securities purchase program , ECB, November 19, 2014.
  18. ↑ ECB bond purchase: Draghi's double error , Spiegel Online, January 24, 2015.
  19. ↑ a b ECB program for corporate bonds: Draghi's billion-dollar injection for the mighty , Spiegel Online, June 8, 2016.
  20. ↑ ECB announces QE , NordLB, January 22, 2015
  21. ↑ The weak points in Draghi's billion plan , Zeit Online, March 19, 2015.
  22. ↑ Michael Rasch: Boring questions to Mario Draghi , Neue Zürcher Zeitung, September 7, 2016.
  23. ↑ a b Source: Publications of the Deutsche Bundesbank.
  24. ↑ DBB: "Pandemic Emergency Purchase Program (PEPP)" Deutsche Bundesbank, March 2020
  25. ↑ The secret billion dollar transactions of the central banks , Die Welt, November 29, 2015.
  26. ↑ The Big Secret of Europe's Money Makers , Die Welt, December 1, 2015.
  27. ^ Secret printing of money in Rome and Paris , FAZ.NET, December 7, 2015.
  28. ↑ Does Mario Draghi now dare to break the next taboo? , Die Welt, August 17, 2016.
  29. ↑ "Buy stocks? An absolute crazy idea ” , Handelsblatt, August 24, 2016.
  30. ↑ ECJ: Preliminary ruling of the Grand Chamber of the ECJ, Case C ‑ 493/17. December 11, 2018, accessed May 5, 2020 .
  31. ↑ Federal Constitutional Court: Judgment of the Second Senate of May 5, 2020 - 2 BvR 859/15 -. May 5, 2020, accessed May 5, 2020 .
  32. ↑ Federal Constitutional Court - Press - Decisions of the ECB on the government bond purchase program are incompetent. Retrieved May 12, 2020 .
  33. ↑ BVerfG on bond purchase judgment with fatal consequences? In: tagesschau.de. May 17, 2020, accessed January 2, 2020 .
  34. ↑ https://amp.welt.de/politik/deutschland/article231690907/EZB-Urteil-EU-Kommission-leitet-Verfahren-gegen-Deutschland-ein.html