Author Archives: gbrnwtf1

How the EFSI works in practice and how it doesn’t – a case study

Gibran Watfe, 7 January 2016

More than five years after the onset of the euro area sovereign debt crisis, the EU still struggles to recover in terms of growth and employment. The most important project by the European Commission under president Jean-Claude Juncker that is supposed to boost growth is the Investment Plan for Europe. The core of the plan is the creation of the European Fund for Strategic Investments (EFSI) that is meant to mobilize private investments for viable projects across the EU, based on a guarantee backed by the EU budget. For this purpose, the European Investment Bank (EIB) is supposed to invest funds of an amount that is three times the size of the guarantee fund, generating private investments of 15 times the amount of the fund. The idea behind this setup is that the guarantee fund takes on some of the risk of a project so that private investors are attracted, as they have to bear less risk.

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ECB to buy regional and local government debt – what does it mean?

Gibran WATFE, 4 December 2015

Yesterday, the ECB announced an extension of its quantitative easing (QE) programme that was started in March this year. Apart from extending QE for at least six months to March 2017, Mr. Draghi, the President of the ECB, announced a widened scope of the programme. Only certain types of assets are allowed to be bought as part of the QE programme. This included, so far, sovereign and supranational bonds, as well as asset-backed securities and covered bonds. Yesterday, the list of eligible assets was extended to regional and local government bonds. Why did the ECB do this?

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An account of how the European Central Bank managed to keep the Eurozone together

Gibran Watfe, 14 September 2015

It was an unusual Monday morning on May 10th, 2010 in Frankfurt. During the weekend, the heads of state, the president of the European Commission and the president of the European Central Bank were hastily looking for a solution to the imminent euro crisis, before markets would open on Monday morning. It must have been a stressful morning for the ECB staff in DG Market Operations, because it was the day when the ECB announced that it would buy large amounts of government bonds from troubled Eurozone countries in the framework of the Securities Markets Programme. Continue reading

Did the ECB lower borrowing costs for banks and governments?

WATFE Gibran, 1 February 2015

Last week, the European Central Bank (ECB) announced the launch of a massive program to buy sovereign bonds of euro area member states. Although this decision has already received considerable public attention, it is not the first time that the ECB buys sovereign bonds. What is new is the scale on which the ECB will buy securities. In fact, 60 billion Euro worth of sovereign (public) and covered (private) bonds will be purchased per month between March 2015 and at least until September 2016.

Source: ECB, own calculations

Source: ECB, own calculations

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