The European Central Bank will continue to buy Greek bonds under the emergency pandemic program (PEPP) after March 2022, said Isabel Snabel, a member of the ECB’s Executive Committee, in an interview with Bloomberg.
“Greece benefits a lot from the markets with PEPP. In the future, there will still be a significant market presence with PEPP due to reinvestment. It remains to be seen whether this will be enough, “said Snabel, referring to decisions the ECB will take in December on its monetary policy in 2022.
Snabel clarified that what is expected to be completed next March is not PEPP, but the ECB’s net bond purchases through this program (ie the new purchases will correspond to the bond maturities that the central bank has in its portfolio). “PEPP will not disappear when net bond markets are zero. Sometimes people talk about ending PEPP. The PEPP is not going to be completed in March. This may apply to net markets, but not to PEPP itself. “
Shanbel stressed the success of PEPP, thanks to its flexibility in bond markets, adding that “it is important to maintain some flexibility to deal with market fragmentation.”
However, he noted that over time the benefits of bond purchases are waning and should be replaced by other means. “On the one hand, there are declining yields on bond markets and, on the other hand, there are growing side effects,” he said, adding: our future policy “.
Regarding inflation, the ECB official noted that the risks are upward. “It makes sense to assume that inflation will fall below the 2% target in the medium term. However, the risks are upward “, he stressed. “Uncertainty about the pace and extent of the reduction (of inflation) has increased and we must take it into account,” he added.
Snabel downgraded the risk for the eurozone recovery due to the new outbreak of the coronavirus and the restrictive measures taken by some countries, saying that they will only slow down in the short term, especially in the services sector.
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