ECB Says Euro-Area Economy Is Headed for Worst-Case Slump
Comment of the Day

May 27 2020

Commentary by Eoin Treacy

ECB Says Euro-Area Economy Is Headed for Worst-Case Slump

This article by Carolynn Look for Bloomberg may be of interest to subscribers. Here is a section:

“We’ll have a better sense in a few days as we publish our numbers in early June, but it’s likely we will be in between the medium and severe scenarios,” Lagarde said when asked about the outlook in an online question-and-answer session.

The ECB is set to update its official projections for growth and inflation next, when the Governing Council also decides on policy. The central bank launched a 750-billion-euro emergency asset-purchase program in March, and economists are increasingly predicting it’ll be boosted at the June 4 session.

The asset-buying has helped rein in borrowing costs and made it easier for governments to fund stimulus.

And

“All countries around the world had to respond, and as a result of that had to increase their debt,” she said. In the face of the pandemic, “use of debt is not only recommended, it’s the way to go.”

Eoin Treacy's view

Eurozone countries are being encouraged to break the fiscal strait jacket like never before, and now they have the perfect justification for spending. A decade of austerity has not resulted in debt ratio harmonisation as was hoped.

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