ECB’s Vasiliauskas: More Investment Needed to Avoid Long-Term Scarring

11 February 2021

By David Barwick – FRANKFURT (Econostream) – Stronger euro area investment is necessary to avoid long-term damage from the crisis to the area’s economy, European Central Bank Governing Council member Vitas Vasiliauskas suggested on Friday.

In a speech at a joint Bank of Lithuania and European Investment Bank webinar posted to the website of the Bank of Lithuania, which Vasiliauskas heads, Vasiliauskas noted that gross fixed capital formation had fallen much more last year in the Eurozone than in the U.S., where investment this year would again exceed that in Europe.

‘Accordingly, GDP in the euro area is now projected to recover to the pre-pandemic level only towards the end of 2022’, lagging the U.S. and China, he said.

‘Europe should not be satisfied with such an outlook’, he said. ‘The euro area needs a stronger investment push to speed up our recovery and catch up with the other large economies. Otherwise, painful long-term scarring effects will become unavoidable.’

Vasiliauskas urged the ‘consistent and speedy implementation’ of the Next Generation EU recovery fund. ‘However, there is a risk that the European money will not be disbursed quickly enough’, he warned, citing administrative hurdles and insufficiently ambitious plans on the part of Eurozone member states.