Brussels, 05/03/2015 (Agence Europe) - On Monday 9 March, the ECB will start its massive public sector security buyback programme (quantitative easing, or QE).
“We will, on 9 March 2015, start purchasing euro-denominated public sector securities in the secondary market (…). The combined monthly purchases of public and private sector securities will amount to 60 billion euros”, the President of the ECB, Mario Draghi, announced after the meeting of the governors of the monetary institute, which was held in Nicosia. The 'QE' programme will run until “the end of September 2016” at least, until a “sustained” adjustment in the path of inflation, which is consistent with the ECB's aim of keeping inflation rates below but close to 2%, has been observed, he added (see EUROPE 11236).
Euro-denominated securities issued by States, public sector agencies located in the eurozone and international organisations with a sufficient credit rating will be eligible for the QE programme. To allow the ECB to buy public securities issued by Greece and Cyprus, these two countries will have to fulfil the conditions tied into their financial bailout plans. In the case of Greece, the maximum buyback threshold (3% of the existing stock) has already been exceeded, meaning that the ECB will not be able to buy Greek securities until Athens has started to pay back those held by the ECB in the framework of the 'SMP' programme. In the case of Cyprus, the governor of the Bank of Cyprus, Chrystalla Georghadji, has stated that her country could benefit from the 'QE' programme once it has successfully completed the fifth monitoring mission of the creditors, which is still struggling over the adoption of a law on real estate seizures (see EUROPE 11255).
In a response to a written question submitted by Jonás Fernández (S&D, Spain), the ECB states that it will be able to buy back securities issued directly by the European Fund for Strategic Investments (EFSI), which is to be launched under the Juncker investment plan.
Draghi noted the existence of “positive effects' since the QE programme was launched in January, with the borrowing conditions for businesses and households having “improved considerably”, for instance. However, he stressed that economic recovery and the effects of the 'QE' would be greater the more vigorously the eurozone countries reform their economies.
The ECB has also announced new growth and inflation forecasts. It predicts that eurozone GDP will be up 1.5% in 2015, 1.9% in 2016 and 2.1% in 2017. This forecast has been reviewed “upwards”, although growth risks remain “downwards”, albeit to a lesser extent, Draghi explained. As for inflation, this is expected to be zero in 2015, 1.5% in 2016 and 1.8% in 2017. This forecast has been lowered, said the former Governor of Banca d'Italia, who expects inflation to remain “very low, or even zero, in the coming months”, due, amongst other things, to the fall in oil prices, before starting to take off again.
According to the statistical office of the EU (Eurostat), annual inflation was still negative in the eurozone in February (-0.3%, following a level of -0.6% in January).
It is worth noting that the ECB has kept unchanged the interest rates for principal refinancing operations (0.05%), the marginal loan facility (0.3%) and the deposit facility (-0.2%). (Mathieu Bion)