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European Central Bank. Image by Thomas Hassel, Flickr

The bank this week agreed changes to its rules to give itself more flexibility on a €750bn bond purchase programme – the Pandemic Emergency Purchase Programme
it agreed earlier on 18 March.

Legal documents published by the bank will remove the current limit restricting it to holding no more than a third of any country’s debt.

The documents said: “The PEPP is established in response to a specific, extraordinary and acute economic crisis, which could jeopardise the objective of price stability and the proper functioning of the monetary policy transmission mechanism.

“Due to these exceptional, fast-evolving and uncertain circumstances, the PEPP requires a high degree of flexibility in its design and implementation...”

The previous rules applied to the ECB’s Asset Purchase Programme (APP), initiated in mid-2014 to help encourage price stability within its area.

However, the ECB documents said that the PEPP’s “monetary policy objectives are not identical to that of the APP”.

It said: “Purchases shall be carried out under the PEPP to the extent deemed necessary and proportionate to counter the threats posed by the extraordinary economic and market conditions on the ability of the Eurosystem to fulfil its mandate.”

The ECB said it will now also permit securities with a maturity of more than 70 days to be purchased under the programme.

Previously, only sovereign bonds with maturities of between one and 30 years were eligible.

Purchases under the programme will continue until the crisis is over, the ECB said, but will not end before 2021.