The downbeat assessments come amid a meltdown in financial markets not seen since the height of the global financial crisis in 2008. It marks a grim start to the week for European Central Bank policy makers, who meet in Frankfurt and may be forced to lower interest rates and step up bond purchases. The U.S. Federal Reserve has already acted, with an unexpected easing last week.
“I want a strong, massive, coordinated response,” Le Maire said on France Inter Radio as the central bank slashed the outlook for the country’s economic expansion this quarter to 0.1% from 0.3%.
“We should work on a stimulus plan with fiscal and budgetary measures, and tax cuts, so that when the epidemic crisis is over we can relaunch the economic machine,” he said. The virus is another blow to the euro area’s second-largest economy, after disruption from strikes caused output to shrink at the end of 2019.
“This slowdown is potentially severe but temporary,” Bank of France Governor Francois Villeroy de Galhau said in a rare statement accompanying the report.
The markets tend to test new central bankers and Christine Lagarde’s honeymoon period is definitely over. The ECB will be expected to lay out what kind of assistance it is willing to provide. While room for interest rate cuts is limited because they are already so low, there is plenty they have do to ensure ample liquidity in the system.Click HERE to subscribe to Fuller Treacy Money Back to top