ECB’s Lagarde: Costs of Crisis Continuing to Rise

8 May 2020

By David Barwick – FRANKFURT (EconoStream) – The economic fallout from the coronavirus pandemic is becoming more and more severe, European Central Bank President Christine Lagarde said Friday.

According to prepared remarks for a virtual conference organised by the European University Institute, Lagard promised the full support of the ECB for the recovery.

“…the costs of the crisis continue to rise and, as we move forward, the form of fiscal support will likely change: discretionary spending may increase, automatic stabilisers will kick in further and – in more severe scenarios – the loan guarantees supporting firms could be called,” she said.

An amount greater than 10% of Eurozone output may be needed to meet the costs of the recession and the fiscal response, she said, if the contraction is around 8% and thus at the midpoint of the ECB’s range of estimates.

A joint European fiscal response, if “swift, sizeable and symmetrical,” would mitigate the risk of the crisis widening asymmetries between countries, she said.

When the time comes for European policymakers “to shift from providing backstop support to enabling the recovery,” the ECB will do whatever is required within the limits of its mandate to help, she said. In addition, “we remain undeterred in delivering on our price stability objective,” she added.