ECB bond buys to top €1tn

The European Central Bank (ECB) discussed a bond purchase programme with a volume of more than €1 trillion at its meetings this week, the German newspaper Frankfurter Allgemeine Zeiting (FAZ) reported yesterday.

“It concerned an extension of the balance sheet by more than the €1tn that has been talked about in public,” the FAZ reported, citing an insider from the Eurosystem of eurozone central banks.

The ECB governing council met on Wednesday and Thursday.

The FAZ has often taken a critical line on ECB policy. Earlier on Friday, the head of Germany’s Bundesbank warned the ECB against copying the money printing programmes used in the US and Japan.

ECB policymaker Ewald Nowotny yesterday backed bank president Mario Draghi on steps to revive the eurozone economy with new stimulus.

The support of Nowotny, Austria’s central bank chief, may prove crucial for Draghi as he seeks to expand the scale of ECB action next year, most likely including quantitative easing (QE), the printing money to buy government bonds.

Draghi said on Thursday the ECB would decide early next year whether to take fresh action to revive the economy, and said the bank’s governing council would not need to be unanimous to begin sovereign bond buying.

Indeed, central bank sources say a change in wording to firm up language on Thursday about the expansion of the bank’s balance sheet already came over the objections of the two Germans on the ECB, Bundesbank chief Jens Weidmann and ECB policymaker Sabine Lautenschlaeger.

Nowotny, who central bank sources say opposed an ECB decision earlier this year to buy bundled debt known as asset-back securities (ABS), swung in behind the ECB president yesterday.

“The position of the Austrian National Bank is in line with what Draghi said in his opening remarks,” Nowotny told a news conference in Vienna. “The goal is for the ECB balance sheet to expand to counter a trend towards sinking inflation and growth weakness. How exactly that will happen will be decided next year.”

Reuters