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Economic Insight: ECB - a secret tapering recipe?

  • First, the ECB reinvestment amounts are hefty. According to our calculations, in 2018 rolling over for Germany, France, Italy and Spain will sum up to around EUR 135bn – i.e. more than two months of current QE total bond purchases. If the ECB were to stop reinvesting principals, it could free up a maximum of 17% of the EUR 4.5 trillion balance sheet over five years (EUR 712bn according to our calculations covering the main four QE-countries).

  • Secondly, reducing the rolling over of principal payments can be seen as smoother (lesser amounts) and less transparent. A new form of “constructive ambiguity” from the Council?

  • Thirdly, stopping reinvestments of principal payments while leaving QE unchanged could reduce potential stress for Italy more than it adds to German scarcity.