ECB increases crisis bond-buying program by $676 billion

The European Central Bank announced it will increase the size of its crisis bond-buying program in response to the coronavirus pandemic. Yahoo Finance’s Oscar Williams-Grut discusses.

Video transcript

- We're going to head over to London to take a look at what steps the European Central Bank is taking to not only boost employment, but to stimulate the economy there. And it starts with over $1.5 trillion in bond buying at this point, correct?

OSCAR WILLIAMS-GRUT: Not quite, Adam. $1.35 trillion in bond buying, but I mean, close enough, in the same ballpark. When we're playing trillions, it really becomes pretty hard to keep track of it.

And this comes after the facility-- the Pandemic Emergency Purchase Program was almost doubled today by 600 billion euros in additional purchasing power. The ECB didn't fluff its lines this time. You remember that Christine Lagarde, earlier in the year, came in for heavy criticism for saying it wasn't her job to close the spreads, leading to fears that she perhaps wouldn't stand behind the eurozone economy in the way that we needed during this pandemic.

The 600 billion euro increase we saw today was actually 100 billion more than the market had expected, and the reaction has been incredibly positive, the market taking this as a sign of her own sort of Mario Draghi whatever-it-takes moment, a sign that actually, Lagarde will backstop the economy.

The euro is trading up 1% against the dollar and about 0.7% against the pound, a sign of just how much investors like what they've heard from Lagarde this morning.

- Oscar, do investors like what they're hearing from Germany and the efforts to stimulate the economy in the largest economy in Europe?

OSCAR WILLIAMS-GRUT: Yes. Well, this is, again, another massive stimulus package that was [INAUDIBLE] late last night by the German government, the various parties getting together to agree, 130 billion euros' worth of stimulus.

Now, this comes, just months after a 750 billion euro package to support the economy that was announced back in March. But whereas that package was all about sustaining the economy through the shutdown and the worst of the pandemic, this new package is more about the bounce-back, trying to spur a recovery.

Now, part of this stimulus include 50 billion euros for addressing climate change, innovation, digitization, further, 25 billion euros in loans and grants to small- and medium-sized businesses to help them bounce back from this shutdown, and also a VAT cut to try and stimulate spending.

As I said, this was agreed late last night for a coalition. And it really shows the changing times in Germany, which once prized its black zero-- that's a balanced budget-- that is now growing hundreds of billions of euros at its economy.