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The ECB said in a statement that it will respond “where appropriate” to the situation unfolding at its next meeting in December, ensuring that “financing conditions remain favorable to support the economic recovery and thwart the ‘negative impact of the pandemic’ on inflation.
During a press conference, ECB President Christine Lagarde made it clear that the central bank was ready to act.
“The information received indicates that the economic recovery in the euro area is losing momentum faster than expected after a strong but partial and uneven rebound in economic activity during the summer months,” said Lagarde. The central bank is currently evaluating its toolkit to determine how best to deliver additional economic assistance, she said.
The ECB “has made clear its intention to provide more support in December,” said Andrew Kenningham, chief economist Europe at Capital Economics. “The new restrictions announced in France and Germany, and likely to be replicated elsewhere, will likely tip the eurozone economy into another recession,” he wrote in a research note Thursday.
France and Germany announced sweeping restrictions on Wednesday to stem a second wave of coronavirus infections.
France will begin a four-week nationwide lockdown starting next Monday. Non-essential businesses, restaurants and bars will be closed and people will only be allowed to leave their homes to go to work, care for loved ones, keep a medical appointment, visit the grocery store or exercise . The lockdown of France will last until December 1 “at a minimum,” said President Emmanuel Macron.
In Germany, bars, restaurants and cafes will close from Monday, except for take-out services. Theaters and concert halls will cease to function, as will amateur sports and recreational facilities. Schools will remain open in both countries.
Lagarde said on Thursday that such measures had triggered a “sharp deterioration” in the short-term economic outlook, complicating past projections that the region’s economy would continue to grow in the last three months of the year.
“It’s very difficult to predict how December will compensate for November,” she said. “But we’re not expecting good numbers for November, obviously.”
In the meantime, Lagarde has made it clear that the ECB is ready to take dramatic action, as it did when the pandemic first triggered lockdowns in March. She pointed out that the central bank still has a lot of tools at its disposal.
“The ECB was there for the first wave,” she said. “The ECB will be there for the second wave.”
Following his press conference, analysts said there were only two real questions left: what kind of help will come and how big the package will be.
– Fred Pleitgen, Tara John and Claudia Otto contributed reporting.
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