15 April, Politeia, Bob Lyddon
The European Central Bank has responded to the to the pandemic through another programme of bond buying. This, as I explain in The ECB’s Pandemic Emergency Purchase Programme, has taken up hundreds of billions of euros of Eurozone member state government bonds into the ECB’s Pandemic Emergency Purchase Programme, the ‘PEPP’.
The PEPP bought the majority of new debt issued in 2020 by countries like Spain, Italy and Portugal. The result has been to concentrate 50 per cent of Eurozone public sector debt in the hands of Eurozone financial mechanisms. The proportion could be much higher if the original balances held on accounts in the TARGET2 (the system used for settling payments) payment system were revealed.
ECB operations have driven bond yields down to around 0 per cent, saving Eurozone public sector borrowers billions of euros in interest payments. The ECB has driven both speculators and private investors out of the market: activity is concentrated between Eurozone financial mechanisms and investment banks.
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