ECB’s Lagarde shifts burden to governments to aid recovery

© Reuters. Informal Meeting of Ministers for Economics and Financial Affairs in Berlin © Reuters. Informal Meeting of Ministers for Economics and Financial Affairs in Berlin

FRANKFURT (Reuters) – Euro zone governments must keep spending heavily to aid the bloc’s recovery from its historic pandemic-induced recession, complementing already super-easy monetary policy, European Central Bank President Christine Lagarde said on Sunday.

With debt levels blowing past 100% of GDP this year, concerns are rising that politicians will struggle to push through more support and some subsidies, raising the risk that employment and income schemes could abruptly end.

“Confidence in the private sector rests to a very large extent on confidence in fiscal policies,” Lagarde said in a speech. “Continued expansionary fiscal policies are vital to avoid excessive job shedding and support household incomes until the economic recovery is more robust.”

Employment subsidy schemes have already been extended in several countries but some are advocating longer, one- or two-year extensions to bolster confidence while the bloc recovers from recession that could slash 8% from output this year.

“Keeping job support schemes in place is critical to avoid a sharp increase in unemployment later in the year,” she added in a speech to the Annual Meeting of the Council of Governors of the Arab Central Banks and Monetary Authorities.

Lagarde also urged a final deal on the European Union’s 750 billion euro recovery fund, which is still under negotiation and subject to political bickering.

For its part, the ECB is ready to adjust all of its instruments as needed since there is no place for complacency, Lagarde said, largely repeating the bank’s standing message.

The ECB has eased policy several times this year and now estimates that its measures will add 1.3 percentage points to growth and 0.8 percentage point to inflation through 2022.

Lagarde also repeated her comments from Thursday that the ECB would “carefully” assess incoming data, including the euro’s strengthening, which risked dampening both growth and inflation.

Disclaimer: Fusion Media would like to remind you that the data contained in this website is not necessarily real-time nor accurate. All CFDs (stocks, indexes, futures) and Forex prices are not provided by exchanges but rather by market makers, and so prices may not be accurate and may differ from the actual market price, meaning prices are indicative and not appropriate for trading purposes. Therefore Fusion Media doesn`t bear any responsibility for any trading losses you might incur as a result of using this data.

Fusion Media or anyone involved with Fusion Media will not accept any liability for loss or damage as a result of reliance on the information including data, quotes, charts and buy/sell signals contained within this website. Please be fully informed regarding the risks and costs associated with trading the financial markets, it is one of the riskiest investment forms possible.

Let’s block ads! (Why?)

Economy News

Leave a Reply

Your email address will not be published. Required fields are marked *