In France, one of the presidential candidate said that the European Central Bank should purchase the public debts of the country and transform it into a perpetual debt (this is a literal translation, I don't know if there is a specific word for that in English).

Since I have very little knowledge about economics and how the ECB works, I find it very unlikely that a bank can just purchase the entire debts of a country.

I would like to know if this is really possible and if so, what exactly is a "perpetual debt"?


(The question about perpetual debt was covered by the link to the description of a perpetuity.)

There are two sides to the "is it really possible"?

  1. Could a country that controls its central bank (e.g., Canada, Japan, United States) replace its debt with money issued by the central bank?
  2. Could the ECB do the same thing?

The answer to (1) is that it appears theoretically possible. (In fact, the economic school of thought known as Modern Monetary Theory advocates this.) There is the question of whether this would be a good policy, and the answer to that would be controversial. It should be noted that Quantitative Easing policies of the Federal Reserve and the Bank of Japan involved large purchases of government bonds by the central bank, and there have been no obvious side effects (for example, inflation) yet. These policies represent a step towards the central bank buying up all government debt.

The answer to (2) - could the ECB follow such a policy - is a technical question. The actiona of the ECB are limited by treaties; the usual interpretation of those treaties says that the ECB cannot do this. Certainly, the ECB limited its buying of Greek debt based on its interpretation of the treaties. There would have to be a move to change the treaties that restrict the ECB's actions to allow such a move, which seems like a difficult task.

From the perspective of French policy, the answer to question (2) is more important than (1).


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