The Pandemic Emergency Purchase Programme (PEPP) is a new temporary asset purchase program of private and public sector securities.

As a response to the COVID-19 (coronavirus) crisis, the European Central Bank (ECB) has launched a €750 billion Pandemic Emergency Purchase Programme (PEPP).

On June 4, 2020, the ECB announced that it would increase its PEPP by 600 billion euros, taking the total to 1.35 trillion euros.

The duration of the program was also extended from the end of 2020 until June 2021, or until the bank believes the crisis is over.

On December 10, 2020, the ECB topped up its emergency pandemic QE program (PEPP), adding €500 billion in firepower to the facility.

“In view of the economic fallout from the resurgence of the pandemic… The Governing Council decided to increase the envelope of the pandemic emergency purchase program by €500 billion to a total of €1,850 billion,” the December statement reads. Purchases under PEPP will run for an additional nine months, until March of 2022, or “until [the ECB] judges that the coronavirus crisis phase is over.”

It’s basically a massive stimulus package from the ECB to help mitigate the economic shock caused by the coronavirus crisis.

It is an expansion of the ECB’s Asset Purchase Programme (APP), a package of asset-purchase measures that the ECB initiated in 2014 to support monetary policy.

The PEPP, like the earlier APP, includes programs to buy sovereign debt, covered bonds, asset-backed securities, corporate bonds, and commercial paper.

As with the APP, the ECB will make available for lending any securities that it purchases under the PEPP.

Why is PEPP important?

On March 18, 2020, the ECB unveiled PEPP as a temporary program to purchase up to €750 billion in public and private-sector securities until the “crisis phase” of the COVID-19 crisis is over, but at least until the end of 2020.

The ECB’s Pandemic Emergency Purchase Programme aims to support the liquidity and the financial condition of all sectors of the eurozone economy.

This new temporary asset purchase program is focused on both private and public sector securities, which in addition to the €120 billion increase in the ECB’s €20 billion per month program of asset purchases announced on March 18, 2020. amounts to 7.3 percent of euro area GDP.

Purchases under the program, which started on March 26, 2020, will continue until at least June 2021, but may very well extend beyond this time frame should the ECB determine that the coronavirus pandemic remains in a phase of the crisis.

Christine Lagarde, the President of the European Central Bank, also noted that the ECB was fully prepared to increase the size and adjust the composition of this asset purchase program as and when needed.

The ECB has stated that asset categories eligible under the existing asset purchase program of the ECB (APP) would be similarly eligible under the PEPP, those being:

  1. Corporate Sector Purchase Programme (CSPP)
  2. Public Sector Purchase Programme (PSPP)
  3. Asset-Backed Securities Purchase Programme (ABSPP)
  4. Third Covered Bond Purchase Programme (CBPP3)