By David Barwick – FRANKFURT (EconoStream) – The measures taken by the European Central Bank in response to the pandemic’s economic fallout have averted tail risks in financial markets, ECB President Christine Lagarde said Saturday.

In remarks made via videoconference at the inaugural session of the Italian National Consultation, Lagarde suggested that the ECB’s focus now was ensuring financial conditions conducive to a recovery, according to a text provided by the ECB.

With uncertainty about the economy high with respect to both the recovery and the longer-term structural ramifications of the pandemic, stabilisation policies are called on, she said, ‘and here the ECB will continue to take all necessary steps within our mandate of price stability’.

‘Already our policies have dispelled tail risks in financial markets that could have led to self-reinforcing vicious circles’, she continued. ‘We are now orienting our measures to ensure that the right financial conditions are in place to support a recovery from the crisis.’

This, she said, motivated last week’s decision by the ECB to boost the volume of the pandemic emergency purchase programme (PEPP) by €600 billion to a total of €1.35 trillion. These purchases are flanked by a total of up to €3 trillion for lending to banks that are financing the real economy, she observed.

Lagarde cited ‘collapsed’ business investment and historically high consumer propensity to save as evidence of the crisis’ economic impact. She called on governments to take steps that would ‘foster change and smooth the transition to the new normal’ as the pandemic durably altered economies.