The essential battle against the coronavirus epidemic is undoubtedly taking place in hospitals. However, to prevent this health crisis from also becoming an unprecedented economic, social, and financial crisis, governments in Europe and elsewhere are multiplying emergency measures.
Central banks are also called to the rescue because they have very powerful tools that, while often difficult for laypeople to understand, can force banks to continue lending money to households and businesses that need it. This helps to prevent the entire system from seizing up.
Even more than usual, the words of its president, Christine Lagarde, have been closely scrutinized. Communication plays a central role in the work of central bankers because, at the slightest misstep, financial markets can be thrown into panic.
The €750 billion package is intended for buybacks of public and private debt to try to contain the economic repercussions of the coronavirus pandemic.
These buybacks, coming in addition to the extra €120 billion envelope for 2020 decided six days earlier because of the virus, will take place by the end of the year, the institution specified in a statement.
The end of this program will be assessed when “the coronavirus Covid-19 crisis phase is over, but in any case, not before the end of the year,” the statement clarified.
For comparison, from March 2015 to December 2018, the ECB bought securities every month on financial markets for a total of €2600 billion to support the eurozone.
Its plan is even larger than that of the American central bank (Fed), which announced on Monday the purchase of $500 billion in Treasury bonds and $200 billion in mortgage-backed securities.
