How do the ECB’s anti-crisis programmes work?

Nathalie Janson is an associate professor at NEOMA Business School and president of the think tank GenerationLibre.

Tensions over French debt are reviving memories of the 2012 sovereign debt crisis. On 9 October 2026, the yield on ten-year French government bonds (OATs) stood at around 4.80%, against 3.47% for the German Bund, a spread of 133 basis points, a level never seen before. This rise in the risk premium comes as France’s public finances and political uncertainty are worrying investors. The euro area is nevertheless better equipped than in 2012 to deal with a bond crisis.

Two instruments of the European Central Bank (ECB) need to be distinguished. The first, Outright Monetary Transactions (OMT), was announced in September 2012, after Mario Draghi’s famous ‘whatever it takes’. It allows the ECB to buy sovereign bonds on the secondary market, mainly with maturities of one to three years, with no limit set in advance. The aim is to prevent a self-fulfilling panic and fears of a euro break-up from blocking the transmission of monetary policy. However, it can only be activated if a state accepts a European Stability Mechanism assistance programme, with strict conditionality. Although it has never been used, the OMT still has a deterrent effect.

The second, more recent instrument, the Transmission Protection Instrument (TPI), was created in July 2022, following on from the responses to the pandemic but separate from the PEPP emergency purchase programme launched in 2020. More flexible than the OMT, it does not require a prior European Stability Mechanism (ESM) programme. The ECB can buy public-sector securities with a remaining maturity of between one and ten years if unwarranted, disorderly market dynamics pose a serious threat to the transmission of monetary policy. No spread level automatically triggers these purchases. This flexibility does not amount to an unconditional guarantee. The ECB assesses compliance with the EU fiscal framework, the absence of severe macroeconomic imbalances, debt sustainability and the soundness of economic policies. An excessive deficit procedure weighs in this assessment, without automatically excluding the country concerned. Indeed, efforts to follow European recommendations also count. The decision rests with the Governing Council.

This is why the statements of Emmanuel Moulin, the new Governor of the Banque de France, carry particular weight. In the Financial Times in early October, and again on 7 October, he ruled out the idea of ECB intervention to resolve France’s difficulties. Here, the rise in the spread mainly reflects risks specific to France: a high deficit, growing debt and uncertainty over the country’s ability to restore its public finances. It does not therefore amount to unwarranted fragmentation. Part of the rise in bond yields is also driven by the international context: this general movement must be distinguished from the widening of the Franco-German spread.

The paradox, perhaps, is that the ECB could intervene elsewhere if French tensions spread to states whose fundamentals have not deteriorated. Suppose a widespread sell-off of Italian, Spanish or Portuguese bonds caused a disorderly surge in their spreads without sufficient economic justification. Provided the TPI’s conditions were met and monetary transmission was under threat, the ECB could buy their bonds without buying French OATs. A mere simultaneous rise in rates would not be enough, however: the contagion would have to be judged unwarranted.

What is at stake therefore goes beyond France. The OMT and the TPI protect monetary cohesion, not governments from the price of their fiscal indiscipline. By refusing to neutralise risk premiums grounded in public finances, the ECB preserves market discipline, limits moral hazard and protects its independence. The euro area has a firewall against self-fulfilling crises; it has not taken out comprehensive insurance on sovereign debt.