On Thursday 4 June, the Governing Council of the European Central Bank (ECB) is expected to discuss the need to step up its PEPP operation to repurchase massive amounts of public debt from euro area countries, launched in mid-March to ensure financial stability in response to the Covid-19 pandemic (see EUROPE 12450/6).
According to the initial figures unveiled by the monetary institute, the ECB had bought back €234.7 billion of sovereign securities on the secondary markets by 29 May, i.e. almost a third of the total €750 billion earmarked for the PEPP operation, which will last until at least the end of 2020.
In contrast to the previous Quantitative Easing operation, the ECB has moved away from the self-imposed rule to acquire sovereign securities in accordance with its capital allocation key. As a result, €42 billion of Italian public debt was repurchased - a level well above its relative share in the ECB's capital - and only €23.6 billion of French public debt.
These purchases have helped to keep interest rates on the sovereign securities of the euro area countries at a very low level, removing at this stage any risk of a sovereign debt crisis as The Nineteen go massively into debt in order to restart their economies, which have been paralysed by the coronavirus for two months.
On Thursday, the ECB will also unveil new macroeconomic data for the euro area that justifies its very accommodating policy. Its president, Christine Lagarde, has already mentioned a recession in a range between 8 and 12% of GDP for 2020 and, in May, inflation fell to 0.1% due to a sharp drop in energy prices.
Ms Lagarde will certainly be questioned on the position of the European institution, which was given three months by the German Constitutional Court to respond to a ruling challenging both the proportionate nature of Quantitative Easing, the terms of which are more rigid than the PEPP operation, and the primacy of EU law over national law (see EUROPE 12480/17).
Other issues are expected to include the Frankfurt-based institution's work to combat climate change, one of the main themes of the monetary policy review currently extended.
In a report released Wednesday, the NGO Greenpeace has stepped up to the plate. As part of its response to the pandemic, the ECB acquired €7.6 billion in bonds from fossil fuel companies such as Shell, Total and Eni between mid-March and mid-May, contributing to the emission of 11.2 million tonnes of carbon into the atmosphere.
Contacted by EUROPE, the ECB did not confirm these figures, stressing that this estimate is based on a calculation by Greenpeace. It argued that it also buys a lot of shares in companies involved in climate protection.
See Greenpeace report: https://bit.ly/2Buyrvg (Original version in French by Mathieu Bion and Damien Genicot)