09 Nov 2022

The real fiscal cost of central bank bond buying

Daniel Gros / Farzaneh Shamsfakhr

Download Publication


The large bond holdings accumulated by the Eurosystem over the last eight years have represented a massive fiscal bet that interest rates would stay low forever. This bet has now gone spectacularly wrong and has come home to roost. As a result, euro area taxpayers are likely to lose around EUR 700 billion over the coming decade.

In this CEPS Explainer, we provide a quantitative assessment of the potential fiscal cost of the large-scale sovereign bond purchases facing the major national central banks of the euro area and the Eurosystem as a whole. Central bank bond buying constitutes a ‘quasi-fiscal’ policy. This is uncontroversial among economists and it applies to all the bond buying programmes of the major central banks around the world, including the Eurosystem. Our analysis shows a total net cost of PSPP and PEPP purchases of around EUR 640 billion euro over the programmes’ lifetime.