ECB’s Lagarde: Europe Still Needs Monetary and Fiscal Policy Crutches

28 April 2021

By David Barwick – FRANKFURT (Econostream) – Monetary and fiscal policy have to continue supporting Europe’s economy, European Central Bank President Christine Lagarde said on Wednesday.

Interviewed online, Lagarde said, ‘The European economy is on two crutches’, these being monetary and fiscal policy, ‘and those crutches have to remain, supporting the patient.’

With respect to the pandemic, Europe is ‘probably past the peak of the third wave’, but there are ‘downside risks obviously’, chiefly because of mutations of the virus, she said. ‘But the big difference that we have … is that there is definitely light at the end of the tunnel.’

Noting that vaccination campaigns were ‘now finally accelerating’, Lagarde predicted that some 70% of the population of Europe would have received at least an initial vaccine shot by end-June. The first half of the year she nonetheless described as economically ‘not particularly good’, especially with regard to 1Q.

The second quarter would be better, ‘and clearly we’re seeing good signs in terms of PMIs, in terms of high-frequency numbers’, she said. The second half would see ‘good solid economic growth’, she said.

The U.S. fiscal stimulus was ‘clearly helping along the way’, she said, as was the progress in the U.S. toward containing the pandemic.

The ECB’s role was to provide ‘a little bit of certainty by saying, ‘Favourable financing conditions we will preserve, rest assured’, she said.