ECB’s Knot: See Light at the End of the Tunnel, But Hurdles Remain

22 March 2021

By David Barwick – FRANKFURT (Econostream) – Light is visible at the end of the tunnel, but obstacles remain on the way to recovery, European Central Bank Governing Council member Klaas Knot said Monday.

At a press conference for the annual report of the Dutch National Bank, which he heads, Knot said, ‘A full year after the pandemic broke out, we now clearly see light at the end of the tunnel’, but ‘will encounter many hurdles on the path to recovery’.

Although there are fewer uncertainties, there are still many, he said, in particular variants of the coronavirus. ‘Let this be a good reason for dealing the virus a decisive blow once and for all’, he urged.

For the Dutch economy, 2021 would ‘be a year of two halves’ in which an initial quarterly contraction would give way to a strong rebound, leading to about 2% growth for the year and 4% in 2022, he said.

‘This hopeful prospect, which is in line with what we are seeing in neighbouring countries, is underpinned by a number of developments’, he said, citing trade and industry, which ‘appear to have become immune to the pandemic.’

Still, he said, ‘[t]he economic crisis will only be fully overcome once the pandemic is under control.’

As fiscal support is withdrawn, it is important not to let intrinsically sound companies go bankrupt because of high debt, he said. Banks cannot be allowed to face overwhelming loan losses, he said, as ‘that could have dire consequences for the financial sector.’