Southern European countries profit in a disproportionate way from the bond-buying programme of the European Central Bank (ECB), with the largest bias towards Spain and Italy. Within the framework of the Public Sector Purchase Programme (PSPP), national central banks and the ECB have purchased Spanish and Italian government bonds whose volume exceeds Spain’s and Italy’s share in gross domestic product (GPD) by around 43 billion euros and 51 billion euros, respectively. If the ECB continues its bond-buying programme in 2018, this would further extend the preferential treatment of euro countries with high debt levels. These are the findings of a current quantitative analysis by the Centre for European Economic Research (ZEW) in Mannheim.

The ECB bond purchase programme benefits in particular Spain and Italy.
The ECB bond purchase programme benefits in particular Spain and Italy.

The analysis examines whether the ECB is in fact at risk of monetising government debt. To this end, the study analysed the distribution of bond purchases across the Eurozone and quantified the ratio of bond holdings to debt level as well as to euro countries’ current budget deficit. The findings show that government bonds purchased within the PSPP make up around 14.4 per cent of the Eurozone’s GDP, with the share of Spanish and Italian bonds amounting to 18.3 per cent and 17.7 per cent of their respective GDP.

Further countries that profit from the ECB’s bond purchase programme in a disproportionate are Portugal, France and Slovenia. In contrast, Greece, Cyprus and the Baltic States benefit the least. The reason why Spain and Italy are the main beneficiaries can, on the one hand, be found in their high public debt, since countries with a low debt level have a smaller stock of eligible bonds. On the other hand, Spain’s and Italy’s shares in the population of the euro area is greater than their contribution to the EU GDP. The allocation of ECB purchases is, however, determined equally on the basis of a country’s GDP as well as its population size.

“The phasing out of the bond-buying programme is long overdue”

“The fact that Spain and Italy are particularly favoured by the programme strengthens the suspicions that the main goal of quantitative easing measures is indeed the fiscal stabilisation of Southern Europe,” says Professor Friedrich Heinemann, head of the ZEW Research Department “Corporate Taxation and Public Finance” and author of the study. “What is particularly problematic is the fact that even those states with the highest deficits have been able to fully cover their budgets since 2015 through ECB’s bond purchases,” he explains.

What is more, the financing effects of the bond-buying programme are even greater than those of the euro rescue operations. The bonds held by the ECB and the national central banks – the latter assuming liability for 80 per cent of PSPP holdings – have already exceeded the volume of liquidity support measures provided to Portugal, Ireland and Spain via the European Financial Stability Facility (EFSF) and the European Stability Mechanism (ESB).

“In net terms, no single Eurozone country still needs any other lender to finance its deficits apart from the ECB,” concludes Heinemann, “the phasing out of the bond-buying programme is long overdue.” If the ECB continues its quantitative easing programme into 2018, the preferential treatment of highly indebted states would be further extended. “The apparent stabilisation of the euro bond markets currently depends entirely on a drip-feed from the ECB,” says Heinemann. “If the financing by the euro central banks stops, the Eurozone will be put to yet another test.”

For further information please contact:

Prof. Dr. Friedrich Heinemann, Phone +49 (0)621/1235-149, E-mail


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