The ECB's reinvestment dilemma

In a series of articles on the European Central Bank, OMFIF Chairman David Marsh, Deputy Head of Research Ben Robinson and Research Assistant Pierre Ortlieb review how the politics of Europe's quantitative easing programme reflects the innate complications of carrying out unified monetary operations across the euro area. These realities will overshadow the intricate technicalities of QE reinvestment next year.

The ECB faces possible charges of discrimination from Italy over maintaining its QE programme. Technical changes in allocating reinvestment of national central banks' maturing bond holdings in 2019 could exacerbate Italy's dispute with the European Commission over Rome's budgetary policy. Potential squabbles centre on the quinquennial recalculation of the ECB's 'capital key', which reflect long-running differences over different countries' benefits and disadvantages from euro membership.

The ECB needs quickly to inform financial markets and the general public how it will conduct reinvestments next year. Otherwise, the enormous complexity of the task now being considered is almost certain to provoke accusations of unfair treatment from different sides.

The three articles were published between 23-25 October:

1. ECB capital key dilemma on reinvestment

2. ECB ponders reinvestment options

3. Speedy communication needed

OMFIF would be pleased to receive comments on this series. Please email publishing@omfif.org.