ECB could increase size of bond-buying programme if crisis persists – Lagarde

epa07957420 Christine Lagarde, outgoing ECB president Mario Draghi's successor, speaks during Draghi's farewell and bell handing over at the headquarters of the European Central Bank, Frankfurt, Germany, 28 October 2019 (issued 29 October 2019). EPA-EFE/BERND KAMMERER / POOL

Reading Time: 2 minutes

European Central Bank President Christine Lagarde announced that the Bank would be ready to increase its planned €750 billion bond-buying programme to support European economies in the current economic crisis brought about by the coronavirus pandemic. According to a number of forecasts, the eurozone economy could fall by as much as 12% this year, on the assumption that there is not an equally deadly second wave of infections later this year.

Since the ECB issued its Pandemic Emergency Purchase Programme (PEPP) in mid-March, the situation has worsened around the continent. The ECB estimates that the eurozone economy stands to drop between 5% and 12%, according to the duration of social and economic restrictions.

In this context, ECB President Christine Lagarde insisted that the institution was “fully prepared to increase the size of the PEPP and adjust its composition, by as much as necessary and for as long as needed.”

Lagarde is also reported to have announced that the ECB would further incentivise banks’ lending to the real economy to ensure that companies and households have sufficient liquidity during this difficult period.

For this to be achieved, the ECB would lend money at very low rates.

Currently, the ECB is already buying high volumes of Italian debt to ensure market stability. In consideration of previously-existing bond-buying programmes, the ECB has a total of almost €1 trillion in such facilities. “The Governing Council remains fully committed to doing everything necessary within its mandate to support all citizens of the euro area through this extremely challenging time,” added Lagarde.

Lagarde, who was speaking via video conference, said that the return to the “new normal” is “certainly not in the next few months, we are looking at way down, and probably at 2021”.

Read more via Euractiv.com

%d bloggers like this: