The coronavirus pandemic, characterized by the European Central Bank (ECB) as “a collective public health emergency unprecedented in recent history”, is unarguably expected to have significant impact on economic activity across the euro area.
In this context, given the increased uncertainty both in the euro area and globally, the ECB Governing Council announced a €750 bn plan, called Pandemic Emergency Purchase Programme (PEPP), to support European economies and mitigate the economic impact of COVID-19 outbreak across the euro area.
What are the main features of the PEPP?
Under this programme, the ECB will purchase government and corporate bonds from countries across the euro area including also Greek government bonds. This practice, which is also known as quantitative easing (QE), consists of one of the key crisis-mitigating option in monetary policy.
The programme has been planned to be temporary and it will last until the ECB estimates that this crisis has been over "but in any case not before the end of the year".
The ECB may extend the scope of the programme, as well as the criteria for eligible securities, "by as much as necessary and for as long as needed”.
What are the ECB’s main goal from launching PEPP?
The main goal of this programme, is to ensure that the financial sector remains liquid and able to support the existence of the necessary financing conditions for all sectors in the economy.
The ECB also stated that they “will explore all options and all contingencies to support the economy through this shock” through this programme and through any other appropriate action.
What does this measure actually mean for the European and global economy?
This measure announced by ECB, which had a little room for manoeuvre even before the crisis hit, is only an answer that highlights the main question the economies and many businesses as well need to answer; how to fund their working capital needs.
It is also a measure that shows that the financial sector (including ECB, the Central Banks and the all Financial Institutions) has to play a crucial role by giving practical and viable solutions in that same question.
You can access the full ECB announcement here.