10 - ECB Measures during the Covid-19 Pandemic

Summary

The pandemic was a new and unforeseen event for the ECB and for the European Macroeconomic Constitution. The ECB took measures on multiple fronts to support Member States in their health, social and also public finances crises. The main approach was to support households and companies through the pandemic, so that the recovery would be as steep as the decline. Various forms of financing to households and companies were accompanied with relaxation of supervisory criteria to allow banks to continue lending. The largest measure was PEPP, a massive asset purchase programme for government bonds and also other debt securities. The responses to the pandemic raised similar constitutional questions as before: were the responses part of the ECB’s task to conduct monetary policy; could they be based on other tasks; did they respect the fiscal responsibility of the Member States and the prohibition of central bank financing; what was the impact on the ECB’s independence; and were other elements of the European Macroeconomic Constitution affected? The unforeseen and extreme circumstances promote a lenient assessment, but some issues still raised doubts. The backstop role of the PEPP could be problematic, and potentially is the relaxation of banking supervision criteria.