ECB Working to Expand & Supporting Euro Globally - Economist

ECB Working to Expand & Supporting Euro Globally

ECB Working to Expand & Supporting Euro Globally

The European Central Bank (ECB) announced on Saturday, February 14, plans to expand access to its Eurozone liquidity support facility (ELS) and make it globally available and permanent, in an effort to bolster the single currency's international role.

Access to these repurchase lines, a vital source of funding during periods of market turmoil, had previously been limited to a small number of Eastern European countries. However, ECB President Christine Lagarde has long considered the facility a tool for promoting the global use of the euro.

“The ECB must be prepared for a more volatile environment,” Lagarde said at the Munich Security Conference, her first appearance as ECB president at the event.

“We must avoid any situation where this pressure could lead to a massive sell-off of euro-denominated securities in global financial markets, which could undermine the effectiveness of our monetary policy,” she stated when announcing the new mechanism.

The ECB explained that this mechanism, which will be available from the third quarter of 2026, will be accessible to all central banks worldwide, provided they are not excluded for reputational reasons such as money laundering, terrorist financing, or international sanctions.

The repurchase (repo) line is used when banks are unable to obtain funding from the market. It allows lenders to borrow euros from the European Central Bank against high-quality collateral, with repayment due at maturity plus interest.

Unlike previous lines that required periodic extensions, the new mechanism will provide permanent access to up to €50 billion.