ECB President outlines her plans for overcoming the second wave of economic damage from COVID

Although lockdowns are beginning to ease across Europe after a brutal second wave of coronavirus infections in October and November, governments need to prepare for a second economic hit, European Central Bank (ECB) President Christine Lagarde said on December 1.

“Clearly all the [Purchasing Managers’ Index] PMI numbers and the latest developments that we are seeing are showing that the economy is still suffering,” Lagarde explained. While positive news about vaccine development means “we are seeing the other side of the crisis,” she argued, “we have not crossed that crisis yet. We are still in the midst of it.”

Since businesses were forced to temporarily close and travel was halted to control the increase in infections of the last two months, policymakers need to ensure that “fiscal policy is going to be more potent and has to continue to be deployed in order to stimulate demand,” Lagarde said. The ECB is prepared to take needed action as well, she added. “We demonstrated that we were there to support the economy during the first wave of coronavirus. We will be there for the second wave which is underway.”

The ECB president spoke with Atlantic Council President and CEO Frederick Kempe to mark the launch of the Atlantic Council’s new GeoEconomics Center. Here’s a brief look at what she had to say on coronavirus stimulus, digital currency, and more:

 
Riding out the second wave

• Light at the end of the tunnel, but we’re still in the tunnel: Lagarde celebrated the recent news from vaccine developers suggesting that vaccination could be widespread at some point in 2021. But policymakers still have work to do to make sure their economies and societies can ride out the rest of the pandemic storm. “Fiscal authorities have to continue to deploy fiscal tools…because we want to carry [them] to the other side” to ensure that a recovery is possible once vaccines are distributed, she said.
• Focus on fiscal stimulus: With economic data already showing the pain inflicted from the second round of shutdowns across Europe, Lagarde argued that governments must continue to pump fiscal stimulus into the economy. She suggested, however, that policymakers take care to target these measures “because not all sectors are at risk at the moment,” as the manufacturing sector may not need the same rescue package as the beleaguered tourism industry.
• ECB stands ready:While not providing specifics of how the European Central Bank will respond ahead of an important December 10 rate meeting, Lagarde said that the ECB “will recalibrate some of the instruments that we have used in order to make sure that they continue to sustain the economic recovery [and that] they continue to support very attractive financing conditions going forward.”

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Πηγή: atlanticcouncil.org