With euro zone nations locking down their economies to slow the spread of the novel coronavirus, the bloc’s economy shrank last quarter and a contraction in the first three months of 2021 is a distinct possibility as much of the services sector remains shut.
“We expect the upswing to gather pace around the middle of the year, even if the uncertainties persist,” Lagarde told Le Journal du Dimanche in an interview. “Let’s be clear: we will not see a return to pre-pandemic levels of economic activity before mid-2022.”
With monetary policy already stretched, fiscal policy must pick up the slack, and Lagarde called on Europe’s political leadership to finally ratify an unprecedented 750-billion-euro ($903 billion) recovery fund.
“The plan needs to be ratified in time for the European Commission to borrow as planned next June and to then distribute the funds,” she said.
Lagarde offered no fresh hints on monetary policy and merely repeated the ECB’s guidance that it could still increase its asset purchase quota, if needed, but could also underbuy this quota if market conditions remain benign.
($1 = 0.8304 euros)
Source: Economy - investing.com
