ECB Bond Purchase Programme Increasingly Focused on High-Debt Countries

The European Central Bank (ECB) has increasingly been purchasing bonds from countries with high levels of public debt. This is confirmed by a comparison between the purchases made in 2015, the first year the Public Sector Purchasing Programme (PSPP) was introduced, and the purchases in 2017. This comparison was conducted as part of a recent analysis by the Centre for European Economic Research (ZEW), Mannheim.

While in 2015, 59.0 per cent of bonds purchased by the ECB were from Spain, France, Italy, Belgium and Austria, by 2017 this figure had risen by more than four percentage points to 63.3 per cent. This means that the national allocations of bond purchases have drifted further and further away from the ECB capital key, which serves as a control parameter for the bond purchase programme. Of the purchases made in 2017, the shares of bonds bought from Italy, France, Belgium and Austria are currently around 10 per cent above the level they should be according to the capital key. An analysis conducted by ZEW in October 2017 has already shown that countries in Southern Europe like Spain and Italy benefit the most from selling bonds to the ECB.

Professor Friedrich Heinemann, head of the ZEW Research Department “Corporation Taxation and Public Finance” and author of the study, sums up its findings: “In light of the current case before the European Court of Justice looking into the ECB’s unconventional monetary policy, the concentration of purchases from high-debt countries will add fuel to the plaintiffs’ arguments. If a measure is purely motivated by monetary policy, it should not favour any country in the purchase of bonds. With each month of new purchases, this clear prioritisation of high-debt nations is becoming ever more painfully obvious. As a result, doubts are beginning to grow over whether the programme is in compliance with the ban on monetary financing in the Treaty on the Functioning of the European Union.”

For further information please contact

Prof. Dr. Friedrich Heinemann, Phone +49 (0)621/1235-149, E-mail friedrich.heinemann@zew.de