ECB set to buy less Italian, Spanish debt
A file picture dated 01 July 2015 of the headquarters of the European Central Bank (ECB) in Frankfurt, Germany. EPA-EFE FILE/FRANK RUMPENHORST
Frankfurt, Germany, Dec 3 (efe-epa).- The European Central Bank is likely to buy less Italian and Spanish government debt from January after the bank changed its internal weighting of economies in the 19-nation currency union, according to a report from Dow Jones Newswires supplied to EFE on Monday.
The change could pile further pressure on Italian government bonds, whose prices have slumped in recent months amid a confrontation between Rome and the European Union over the nation's budget deficit.
The ECB said on Monday it had adjusted its capital key, which assigns a shareholding to each national central bank based on population and economic size.
Germany's share of ECB capital will rise to around 18.4 from 18 percent, while Italy's will fall to 11.8 from 12.3 percent, and Spain's from 8.8 to 8.3 percent. The change will come into effect on Jan. 1.
The changes are likely to affect how the ECB purchases bonds under its 2.6 trillion euro ($2.94 trillion) bond-buying program, known as quantitative easing.
The QE program is expected to be phased out from January, but the ECB will continue to reinvest proceeds of its enormous stock of maturing bonds for some time, possibly for years.
Until now, the ECB has oriented its purchases roughly to its capital key, meaning that its biggest stock of national bonds is German bunds.
It currently holds 513 billion euros of German government bonds and 362 billion euros of Italian government debt, added the Dow Jones report.
ECB officials haven't yet decided on their strategy for reinvesting maturing QE bonds. But the most likely outcome is that the bank will reinvest in bonds in line with the new capital key. The decision will probably be announced after the bank's next policy meeting on Dec. 13.
By Tom Fairless