ECB decreased purchases of Portuguese debt (again) to a new minimum

  • ECO News
  • 6 June 2017

The European Central Bank has once again decreased their purchases of Portuguese debt to a new historic minimum.

The European Central Bank (ECB) continues decreasing the pace of its Portuguese bonds’ purchase within the public sector purchase programme (PSPP). In May, the monetary authority acquired 504 million euros in Portuguese securities — a new all-time low.

Each month, ECB reduces its purchases of debt not only in Portugal, but also in the majority of the Euro Area countries. There are many reasons for this decrease, the first being that they reduced the magnitude of their stimulation plan last year’s April. Instead of the monthly 80 billion euros, ECB decreased the pace to 60 billion euros, which marks the beginning of a return to stimuli which were implemented to revive the economy.

Concerning Portugal, this was the sixth month of decrease in purchases. And the 504 million euros of Portuguese debt acquired are comparable to the monthly average of 1,023 million euros since the beginning of the programme which began in 2015. Overall, the entity headed by Mario Draghi held 27.6 billion euros in Portuguese securities by the end of last month.

ECB’s plan foresees a set of rulings which narrow the amount of debt purchases per country, namely each member’s capital key: ECB can only buy up to 33% of bonds from each country, for example. In addition, as ECB’s vice-president Vítor Constâncio explained, the central bank is purchasing less Portuguese debt than the goal set by that capital key because of previous acquisitions made within a similar programme between 2010 and 2012.

The PSPP should end in December 2017, but several people responsible for the institution headed in Frankfurt have already highlighted the stimuli removal will be gradual in order to avoid disturbances in financial markets. Economists are hoping ECB will take action for that matter.