ECB’s Schnabel: ECB To Do Everything Needed To Support Euro Area

6 April 2020

5th April 2020 By David Barwick - FRANKFURT (EconoStream) – The European Central Bank will do whatever is needed to support the euro area and will ensure that monetary policy is smoothly transmitted in all member state economies, ECB Executive Board member Isabel Schnabel said over the weekend. In an interview with Greek daily To Vima, a text of which the ECB made available, Schnabel stressed in the context of the pandemic emergency purchase programme (PEPP) that the Governing Council would not be bound by limits it had previously imposed on itself. The PEPP is contributing to financial market stabilization and better financing conditions, she said, “not least in Greece, where interest rate spreads have dropped markedly.” It will operate until the ECB considers the crisis past, but at least until end-2020, she noted. To those who object to the ECB’s willingness to breach the issue limit of 33% in its bond purchases, Schnabel responded unequivocally. “The ECB has made it clear that, within its mandate, it will do everything needed in order to safeguard the full transmission of its monetary policy in all euro area countries,” she said. “…if necessary and proportionate to the extraordinary risks that we are facing due to the coronavirus crisis, it will consider revising any self-imposed limits, including the issue share and issuer limits, in line with our legal framework.” Greek bonds are included in the PEPP because the crisis’ impact extends to all countries and the ECB “will not tolerate any risks to the smooth transmission of its monetary policy in any euro area country,” she said. “The ECB will do everything that is necessary to fulfil its mandate and support the euro area and its citizens through this historic crisis.” Although so-called coronabonds are “one possibility,” she said, “there are other instruments that could be used, like an EU rescue fund or measures involving the ESM or the European Investment Bank.” The PEPP is “the right instrument” to flank monetary policy, Schnabel said. The OMT programme remains “an essential element of our policy toolkit, but they are not the most suitable instrument to counter the current crisis.”