The European Central Bank announced a €750 billion Pandemic Emergency Purchase Programme on 18 March 2020 as COVID-19 disrupted markets and pushed the euro area toward a deep recession.

Emergency intervention

The programme authorized purchases of public- and private-sector securities. The ECB said it would apply flexibility across countries and asset classes to prevent financial conditions from fragmenting inside the currency union.

Protecting monetary transmission

Borrowing costs had risen sharply for some governments just as they needed to finance healthcare and economic support. The intervention sought to keep credit flowing and ensure that monetary policy reached households, companies and member states.

Long-term significance

The programme became a principal pillar of Europe’s crisis response and was later expanded. It also renewed debate about the boundaries of central-bank action and the division of responsibility between monetary and fiscal policy.

Sources

• ECB: PEPP announcement
• IMF: economic context of the pandemic shock

Featured image is an illustrative Frankfurt view. Photo by cmophoto.net on Unsplash.