More than twenty per cent of the euro area sovereign debt is in the Eurosystem, an important part of which was acquired within the framework of its Public Sector Purchase and Pandemic Emergency Purchase Programmes (PSPP & PEPP). Against this background, questions have been raised regarding the extent of these programmes and the future of the corresponding sovereign debt holdings.
In a recent paper Emilios Avgeouleas and Stefano Micossi advocate for transferring sovereign debt held by the Eurosystem to the ESM, as a way to better stabilize the existing sovereign debt and increase the supply of European safe assets. A sale by the ECB of its sovereign securities portfolio to the ESM would have profound implications for both institutions. It would turn the ESM into a permanent creditor of euro-area states and a market-maker for sovereign debt. It would free the ECB from the distributional implications of its public sector assets purchases and turn it into a more traditional central bank.
This opens a number of issues – legal, procedural, fiscal and monetary effects, etc. – that will be addressed in the webinar. It also opens a larger debate on the institutional relation between the ECB, the ESM and the Next Generation EU of the European Commission – on how the (debt) fiscal and monetary policy should be conducted in the euro area in the aftermath of COVID-19. A debate that will continue in forthcoming events.