ZEW Economist Friedrich Heinemann on the ECB Coronavirus Package

    The Governing Council of the European Central Bank (ECB) has launched a new comprehensive asset purchase programme to stabilize the eurozone in the coronavirus crisis. An initial sum of 750 billion euros will be used to purchase government, corporate and bank bonds until the end of the year. In contrast to the previous government bond-buying programme, the ECB capital key now serves only as a benchmark for the purchases. The ECB explicitly reserves the right to deviate from this key temporarily. In addition, requirements regarding the minimum credit quality of the bonds will be suspended, with the result that, unlike in the previous programme, Greek government bonds can now also be purchased. Professor Friedrich Heinemann, head of the Research Department “Corporate Taxation and Public Finance” at ZEW Mannheim, comments on this matter.

“The coronavirus crisis threatens to set off a major financial and debt crisis. The ECB is trying by all means to back up the corona containment policy and buy time. By abandoning the ECB capital key as a central control parameter, this programme can also be used to ensure liquidity in countries such as Italy or Spain. Nevertheless, the measure is in the interest of all eurozone countries and constitutes a far-reaching but responsible step by the ECB. Just as in the euro debt crisis of 2012, Europe’s central bank is again proving to be capable of acting responsibly in view of a looming major systemic crisis and European politics still being in a state of shock.”