ECB’s Holzmann: See Sustainable Recovery From at Least Mid-2021

26 November 2020

By David Barwick – FRANKFURT (EconoStream) – The euro area economy should experience a durable recovery starting no later than mid-2021, European Central Bank Governing Council member Robert Holzmann suggested on Thursday.

In an interview with Austrian financial weekly Börsen-Kurier, Holzmann, who is Governor of the Austrian National Bank, downplayed the likelihood of massive additional stimulus, saying the recalibration was more about quality.

‘[T]he facts speak for a sustainable economic recovery at least from the middle of next year,’ he said. ‘The further duration and possible increase of the PEPP [pandemic emergency purchase programme], or possible further support measures, will also depend on the early approval and the effectiveness of the Covid-19 vaccines.’

‘At the next Governing Council meeting on 10 December, the scope of any new programmes will certainly be discussed’, he said. ‘It will depend on the new quarterly economic forecasts available at that time.’

It is less a question of quantity than of quality, he said. The Council will consider further purchase programmes and ‘even the implementation of new instruments is not completely ruled out’, he said.

The ECB is not however considering buying equities, he said. ‘In my opinion, even a further reduction of ECB deposit rates would not have the desired long-term effect’, he continued. ‘The effect of negative interest rates on the real economy is only temporary and will melt away in the long term.’

Holzmann conceded with respect to asset price bubbles as a consequence of easy money that ‘[t]he danger is there and we must be watchful. But I don’t see this yet at the moment.’