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The European Central Bank (ECB) has never presented such a comprehensive package of measures: President Christine Lagarde listed seven points at the press conference after the council meeting in order to keep Europe's battered economy running amid the pandemic and the states liquid.

Lagarde named the most important decision first: The ECB wants to provide a further 500 billion euros in order to buy bonds as part of its crisis program (PEPP).

The volume of the cash injection will thus be expanded from 1.35 to 1.85 trillion euros.

The duration is also being extended: instead of the middle of next year, the program is now to run until March 2022.

The ECB President justified the measures by saying that the second wave of the pandemic had hit Europe with full force.

Now it is a matter of providing support to make the consequences for Europe's economy more bearable.

In addition, inflation remains "disappointingly low", which is also a cause for concern for the monetary authorities.

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However, not all members of the 25-member Governing Council seem to have unreservedly approved the extensive package of measures.

Rumors were circulating during the press conference that several central bankers would have preferred to see a shorter program of just six months, while others had argued for an extension of twelve months.

The nine months that the Council finally agreed are thus a kind of compromise in times of crisis.

"We will tailor the program to ensure that funding conditions remain good," said Lagarde.

Source: WORLD infographic

For many experts, the ECB is also the secret financier of the member states.

The monetary authorities already hold government bonds with a volume of around three trillion euros.

This also includes federal bonds totaling 736 billion euros and Italian bonds totaling 530 billion euros.

The ECB is thus the largest creditor and holds around a third of the German and a fifth of the Italian debt.

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And that also arouses desires in politics.

The economic advisor to the Italian Prime Minister Giuseppe Conte recently called for the ECB to destroy the bonds it had bought under PEPP, thereby canceling the debt.

In the case of Italy, that would be € 118 billion in debt relief.

The ECB will not do that, but the PEPP bonds should be reinvested until at least the end of 2023, i.e. the bonds will be withdrawn from circulation for the coming years.

"The ECB has issued a blank check for the finance ministers," says Jörg Krämer, chief economist at Commerzbank.

“With its bond purchase program, which has been increased by 500 billion euros today, the ECB should in fact finance the entire budget deficits of the euro countries in the coming year.

The financial markets remain sedated, especially since the ECB is likely to ease its monetary policy again in mid-2022. "

"Maximum flexibility"

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The fact that the central bank is already expanding its bond purchase volume, although the previous framework was not yet exhausted, is also incomprehensible to some experts.

EU parliamentarian Markus Ferber (CSU) said that the volume of the PEPP crisis program was only half exhausted.

“It is by no means the case that the ECB would have run out of powder if it had not expanded the program today.

With the latest monetary policy decisions, I am unable to see how we can return to normalization of monetary policy in the medium term.

Simply turning on the money tap is not a convincing strategy. "

The monetary policy expert also criticizes the choice of the instrument that the monetary authorities are now using again.

“With the PEPP, the ECB deliberately chooses precisely the instrument with which it has the maximum flexibility - thus it is also moving further and further away from the requirements of the European Court of Justice, which always values ​​fixed upper limits and an orientation towards the ECB capital key in the purchase programs has ”, complains Ferber.

With the latest increase, the ECB is now approaching volume limits, which also created a certain pressure to justify itself.

Many experts agree that monetary policy measures are by no means exhausted.

“The ECB is acting to do its part in dealing with the crisis.

The end of the line has not yet been reached.

Christine Lagarde will continue to provide monetary policy support in the coming year, ”says Thomas Gitzel, VP Bank's chief economist.

Source: WORLD infographic

It also became clear during the press conference that the ECB is increasingly concerned about the appreciation of the euro.

“We are not aiming for an exchange rate.

But it is clear that exchange rates and especially the appreciation of the euro play an important role and put downward pressure on prices, ”said Lagarde.

“So we will follow it, we will continue to monitor it very carefully in the future.” The euro had reached a two-and-a-half-year high at the beginning of December and has appreciated by around twelve percent since mid-May.

A strong euro exchange rate is currently extremely inconvenient for the ECB.

If the euro rises, products from the euro zone will become more expensive and therefore less competitive on world markets - a clear disadvantage at a time when many companies are already struggling with the pandemic.

Imported goods for the euro zone, on the other hand, become cheaper due to the appreciation, which further dampens the already low inflation. According to the forecast of the ECB economists.