The European Central Bank (ECB) will redirect reinvestments of maturing debts to help the most indebted members and will devise a new instrument to stop fragmentation, the bank said on Wednesday (15), seeking to soften the losses in the market they have fueled fears of a new debt crisis.
Yields on government bonds have soared on the periphery of the 19-nation currency bloc since the ECB last Thursday unveiled plans to raise interest rates in July and September to tame painfully high inflation, which is at risk of becoming entrenched.
The liquidation was exacerbated by the absence of any concrete plan from the ECB to limit this rise in borrowing costs, which has raised fears that the authorities are too complacent about the plight of more indebted nations like Italy, Spain and Greece.
“The Governing Council has decided that it will apply flexibility in reinvesting maturing redemptions in the PEPP portfolio, with the aim of preserving the functioning of the monetary policy transmission mechanism,” the ECB said after a rare unscheduled meeting.
PEPP is the ECB’s support scheme due to the pandemic, which has recently ended.
“Furthermore, the Governing Council has decided to designate the relevant Eurosystem Committees together with the ECB services to speed up the project completion of a new anti-fragmentation instrument,” he added.
Source: CNN Brasil
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