ECB Bond Purchases: Too Much for Too Long

As expected, the European Central Bank (ECB) has announced its decision to continue its asset purchase programme beyond the end of the year. Until December of this year the ECB will purchase bonds totalling 60 billion euros each month, dropping down to 30 billion euros a month from January 2018 until at least September 2018. Professor Friedrich Heinemann, head of the Research Department “Corporate Taxation and Public Finance” at the Centre for European Economic Research (ZEW) in Mannheim, offers his view on the subject.

“This reduction in the amount of bond purchases was long overdue given the strong recovery of the Eurozone, but this measure still doesn’t go far enough. The ECB is buying too much and for too long a period of time. The announced purchase of government bonds totalling around a further 225 billion euros in 2018 is particularly problematic.

This will make 2018 the fourth year in a row in which the ECB has introduced more capital to the European government bond market than all the EU Member States need to finance their deficits. With every passing month, the fact that the ECB is now only finding sufficient volumes for its purchases in Member States with the highest levels of debt is becoming more and more of a problem. We can therefore expect to see the shares of ECB bond purchases of Italy, France and Spain continue to grow. This will all give ammunition to critics who accuse the ECB of engaging in monetary budgetary financing under the guise of monetary policy.”

For further information please contact

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