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In my new @DelorsBerlin Policy Brief, I argue that the limitless @ecb Pandemic Emergency Purchase Programme (PEPP) is LAWFUL, since the PEPP is (i) within the @ecb's mandate, (ii) proportionate, and (iii) compliant with the monetary financing prohibition. A short thread. 1/10
(i) The PEPP is within the @ECB's mandate, as it seeks to repair monetary policy channels that were affected by the #Covid_19 pandemic. The @EUCourtPress confirmed in Gauweiler "that a programme to safeguard the appropriate transmission of monetary policy is likely to 2/10
contribute to the ECB’s price stability objective. Since the @ecb considers that the COVID-19 pandemic poses a risk to the smooth transmission of monetary policy, it may swiftly intervene in bond markets to fulfil its (price stability)
mandate. 3/10
(ii) The PEPP complies with the proportionality requirement under EU law. The monetary policy measure is (a) suitable to fulfil the price stability objective and (b) necessary to achieve that objective, thereby complying with standard set by @EUCourtPress in the Weiss case. 4/10
More specifically, the suitability and necessity of PEPP purchases are ensured, since bond purchases are (1) restricted to EUR750 billion, (2) limited in time to periods of malfunctioning monetary policy transmission channels, (3) not selective 5/10
(4) limited to securities with stringent eligibility criteria, and (5) subject to a limited loss-sharing arrangement. 6/10
(iii) The PEPP does not breach the monetary financing prohibition because it (a) has no equivalent effect to bond purchases on primary markets (due to the safeguards mentioned in 5/x) and (b) does not incentivize Member States to pursue „unsound“ budgetary policies. 7/10
Indeed, the only “sound” budgetary policy is to deploy huge fiscal programmes during #COVIDー19 pandemic. The argument that the PEPP could weaken Member States’
resolve to follow sound budgetary policies thus fails to convince. 8/10
Finally, the lack of self-imposed 33% purchase limits (issuer/issue limit) does not make the PEPP's unlawful. The @EUCourtPress does not focused on the exact amount of the limits but on private investors’ inability to resell their securities
with certainty to the Eurosystem. 9/10
Since private investors can never be certain if the Eurosystem will purchase their securities under the PEPP (the @ecb has full flexibility in implementing the programme). Moreover, the @ecb already purchases up to 50% of @ESM_Press bonds and up to 70% of corporate bonds. 10/10
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