EXCLUSIVE-The ECB does not plan to activate its OMT-sources emergency program

FRANKFURT, March 26 (hooly-news.com) – The European Central Bank has no plans to use OMTs, its exceptional sovereign debt buy-back program, believing that this tool it designed but never used is inappropriate in the face of the current crisis, hooly-news.com learned from two sources aware of the ongoing debates within the institution.

Designed at the height of the debt crisis in the euro zone, the “Outright Monetary Transactions / OMT” program allows the central bank to buy directly from a country’s sovereign debt without any limits.

Some officials from the European executive and the ECB have suggested that it be deployed for the first time.

But the program, designed to help countries threatened with debt default or a banking crisis, is unsuitable under the current circumstances, one of the sources said.

“The shock we are going through has nothing to do with what the OMTs were designed for,” said the source, who wished to remain anonymous.

The WTO, which requires that the country concerned has previously requested the use of the European Stability Mechanism (ESM) and is subject to certain conditions, was conceived as assistance to a particular country, not as aid to the whole monetary union.

To counter the effects of the coronavirus, the ECB preferred to launch a new 750 billion euro sovereign debt buyback program called the Pandemic Emergency Purchasing Program (PEPP).

The central bank introduced flexibility in the application of this program by temporarily renouncing its own rule limiting its purchases to 33% of the debt of a given country.

(Balazs Koranyi, French version Patrick Vignal, edited by Marc Angrand)