Brussels (Brussels Morning) The European Central Bank (ECB) decided against strengthening its economic stimulus for now, with ECB President Christine Lagarde announcing more action in December, according to an AP report on Thursday.
New restrictions aimed at curbing the spread of coronavirus threaten the EU’s economy, she said, and economic recovery is losing momentum faster than expected. Because the near term outlook is deteriorating, the ECB will revise its position ahead of the meeting slated for 10 December, Lagarde said.
The deteriorating epidemiological situation will warrant a revision of ECB’s plans and implementation of the new plan. For this reason, she said, the ECB is examining all options, including policies on interest rates, bond purchases and affordable loans to banks.
For the time being, the ECB is sticking with its Euros 1.35-trillion emergency bond purchase programme which is designed to maintain solvency and promote economic activity. The programme should run through the middle of 2021.
The ECB wants to raise inflation to just below 2% from negative 0.3% in September, an adjustment it believes best suits current economic conditions. While figures for the third quarter should be released today, GDP growth estimates for the eurozone stand at some 10%, following a decline of 11.8% in the second quarter. Economic decline in the EU has been partly cushioned by Germany’s economic ties to China, where the German automotive group Volkswagen saw annual growth of sales of 3% in third quarter.
The unemployment rate in the eurozone reached 8.1% in August, with rising unemployment held down by economic measures aimed at protecting jobs. However, the situation in the final quarter this year could take a turn for the worse as infection numbers are on the rise across the continent and more restrictions could be imposed.
Germany’s Chancellor Angela Merkel warned in a speech in parliament on Thursday that winter would be difficult, having ordered the closure of bars, restaurants and theatres until December. Companies in the industry sector are coping with restrictions better than their counterparts in the services sector, with airlines, restaurants and hotels posting steep declines in activity.