A last resort
The ECB launched large-scale asset purchase programs later than other central banks. Until 2014 outright securities purchases had been no more than a footnote of the menu of non-conventional policies. From 2009 to 2012 the Eurosystem operated two covered bond purchase programs. Also, from 2010 to 2012 it bought public and private debt obligations under the “Securities Markets Programme” (SMP). However, total asset purchases under these operations reached just around 2% of euro area GDP.
In the fall of 2014 the ECB began larger asset purchases similar to the quantitative and qualitative easing of the U.S., the UK, and Japan (view post here). In a first step the ECB announced a covered bond purchase program and an asset-backed securities purchase program aiming at a total net balance sheet expansion of at least 4% of euro area GDP per annum over two years.
However, with deflation risks increasing asset purchases had to be topped up. Hence, a Public Sector Purchase Programme (PSPP) was initiated in January 2015 to allow operations at greater volume and speed (view post here and a full manual here). The PSPP would buy bonds issued by euro area central governments, agencies and international or supranational institutions with maturities of between 2 and 30 years.
Thus, by 2015 asset purchases had broadened to encompass asset-backed securities, covered bonds, sovereign bonds and quasi sovereign debt. Pace and size would be open-ended and conditional on inflation expectations. Annual purchases would be 6-7% of euro area GDP.
In March 2016 the governing council decided to expand asset purchases further. In terms of size, monthly purchases would increase from EUR60 billion to EUR80 billion per month, reaching a annual pace of 9% of euro area GDP. In terms of scope, investment-grade euro-denominated bonds issued by non-bank corporations became eligible from June 2016 (corporate sector purchase programme or CSPP). The CSPP intended to strengthen the pass-through of asset purchases to the real economy. The eligibility criteria supported broad access including for smaller issuers.