FRANKFURT (Reuters) - The European Central Bank must stick to existing rules when it starts rolling over its huge portfolio of government debt next year, a Bundesbank director said in an interview published on Wednesday.
The ECB is due to stop adding to a 2.6 trillion euro pile of mostly government debt at the end of 2018 after nearly four years of money-printing aimed at reviving inflation in the euro zone.
Joachim Wuermelling voiced his opposition to suggestions that the ECB might then deviate from a “capital key” rule that sets out how many bonds it can buy from each country depending on the size of its economy.
“Reinvestments, like net purchases, must be market-neutral and not lead to any market distortion,” Wuermelling told German financial daily Boersen-Zeitung.
“Reinvestments should serve the objective of respecting the capital key.”
Germany, as the euro zone’s largest economy, has taken the lion’s share of the ECB’s sovereign bond purchases and its central bank has long opposed any change that would favour more indebted countries such as Italy.
But the ECB has already deviated from its capital key, having bought nearly 5 percent more French and Italian debt than the rule dictates while underbuying countries with small public debts like Estonia and Luxembourg.
Reuters reported last week that the ECB was also considering buying more long-dated bonds to offset the natural ageing of its bond portfolio and was prepared to accept further, minor deviations in how much it buys from each country.
This would be simply aimed at preserving the low borrowing costs brought about by the stimulus programme even after net purchases end.
“The monetary effect of reinvestments stems from the maintaining of the stock of securities,” Wuermelling said.
“The objective is solely to maintain the favourable liquidity conditions... (and) not to provide monetary impulse.”
Reporting By Francesco Canepa; Editing by Matthew Mpoke Bigg