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Headquarters of the European Central Bank in Frankfurt am Main: New instrument against distortions in the bond market
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Frank Rumpenhorst / dpa
The European Central Bank (ECB) wants to accelerate the fight against the sell-off of government bonds.
According to the central bank, funds due from the Corona emergency purchase program PEPP, which expired at the end of March, should be reinvested in a particularly flexible manner.
Highly indebted euro countries such as Italy, which were recently responsible for a growing yield gap (spread) between the government bonds of different euro countries, could benefit from this.
With a large spread in the bond market, countries with higher levels of debt than countries with low levels of debt, such as Germany, have to pay more and more money to raise capital in the markets.
The reinvestment of the money should ensure the functioning of the monetary policy transmission mechanism, the central bank announced after the special meeting of the ECB Council that was convened at short notice.
This is a prerequisite for the ECB to be able to fulfill its task of maintaining price stability.
Interest rates in southern Europe rose particularly sharply
The ECB Governing Council also decided to instruct the relevant bodies in the Eurosystem to "speed up the completion of an anti-fragmentation instrument," it said after the meeting.
The topic of the meeting was »current market conditions«.
The pandemic left permanent vulnerabilities in the euro area economy, it said.
These would lead to an uneven normalization of monetary policy for the individual countries.
In the past few days, interest rates on the capital markets had risen sharply, while sentiment on the stock markets had deteriorated significantly.
The capital market interest rates in southern European countries have recently risen particularly sharply.
One reason for this development is the ECB's announcement that it would stop buying new government bonds at the beginning of July.
At a meeting last week in Amsterdam, the ECB announced that interest rates would be raised by 0.25 percentage points at the next regular meeting on July 21.
In September, "a larger rate hike may also be appropriate."
The financial and budgetary policy spokesman for the CSU state group in the Bundestag, Sebastian Brehm, described the current ad hoc meeting as a "clear monetary policy warning signal".
The monetary policy of the ECB triggered a “massive surge in inflation”.
»The ECB has neglected currency stability in favor of state financing in Southern Europe and has thus taken the pressure off for reform.«
Apr/dpa/Reuters/AFP