ECB tries to save EU economy - central bank will be flexible in reinvesting PEPP program
The pandemic has left persistent vulnerabilities in the eurozone economy that contribute to the uneven normalization of our monetary policy among different countries, the ECB said.
The ECB has instructed Eurosystem committees and ECB services to accelerate the development of a new mechanism to combat fragmentation.
Why it matters. Rising EU bond yields will lead to higher debt service costs for Italy and Greece, as well as other indebted EU countries with debt-to-GDP ratios greater than 100%.
Thus, the ECB cannot raise the rate sharply, as that would bring the EU economy to the brink of collapse. But it is necessary to fight inflation, which is why the ECB is developing new ways to support the most distressed economies.
