Monetary policy measures arrive in the economy

Monetary policy measures are being implemented in the economy

Ecb tower in frankfurt. Image: maslmaslmasl/cc by-sa-4.0

Statement of ecb and bundesbank to the article "purchase of monsanto financed with tax money"

Telepolis has published an article on 24. The article published in june claims that the purchase of monsanto by bayer ag was financed with taxpayer money. This is wrong, and the european central bank (ecb) and the bundesbank have told the author as much. We explain here what the eurosystem – that is, the ecb and the national central banks – actually has to do with bayer and why we bought corporate bonds:

Under the expanded securities purchase program, some eurosystem central banks buy corporate bonds in addition to government bonds. This program was launched in mid-2016 to avert the threat of deflation in the eurozone and ensure price stability. The program was not a reaction to the financial crisis, as the article suggests.

The purchase of bonds is intended to ensure that monetary policy measures reach the economy. The bond purchases improve financing conditions not only for rough companies. Small and medium-sized companies that finance themselves via banks rather than the capital market also benefit from the lower interest rates. This makes it easier for companies to invest, expand and, for example, create new jobs.

Under this program, the bundesbank also bought bayer ag bonds, as well as bonds from almost 50 other companies. The bundesbank buys corporate bonds on the market with central bank money, i.E. Not with taxpayers’ money. From march 2015 to december 2018, the eurosystem purchased about 2.6 trillion euros (here it was written by mistake before) "billions", note. D. Red) for bond purchases, the largest share was for government bonds; the portfolio of corporate bonds currently stands at around 178 billion euros.

Since the bundesbank receives bonds for its money, it is neither a gift nor a subsidy, but a transaction in which an asset changes hands. When the bond matures, the company, in this case bayer, has to repay the bond. The central bank naturally also receives the interest payments on the bond. Such interest payments contribute to the profit of the bundesbank, and taxpayers benefit from the profit distributions of the ecb and the bundesbank. The eurosystem buys the corporate bonds according to the principle of market neutrality. This means that a company’s bonds are bought in relation to the total market volume and at market prices, and in this way individual companies are not overweighted or underweighted. This prevents the central bank from "rough parts" the bonds of an individual company are held. The statement in the article that "a rough part of the bayer bonds were bought by the bundesbank with ecb money" have been made, is therefore incorrect.

In order to be eligible for purchase by the eurosystem, the bonds must meet strict selection criteria. Every monday, the ecb publishes the list of purchased bonds and their interest rate.

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