ECB’s Lane: Euro Area Lags US, Needs Fiscal Policy Support For Sustained Period

17 June 2021

By David Barwick – FRANKFURT (Econostream) – European Central Bank Executive Board member Philip Lane on Thursday argued again that the euro area lagged far behind the United States in policy-relevant respects and urged sustained fiscal support.

Speaking at the Barcelona GSE Summer Forum, Lane said that ‘[t]he timeline is a bit different’ in Europe versus the US, with the latter further along in terms of vaccination progress and economic reopening.

‘And also the nature of the pandemic has been different in Europe’, he said, noting that ‘we’re only really reopening in the last few weeks.’

‘Fiscal policy needs to support the recovery…for a sustained period’, even as fiscal policymakers consider how much room to manoeuvre they need to counter future shocks, he said.

The sovereign debt incurred in mitigating the impact of the pandemic is preferable to what would have otherwise been the case for households and firms, he said.

‘I think the pandemic is going to complicated monetary policy’, he added in this context.

Global inflationary pressure is ‘not in consumer goods yet, it’s at lower levels’, he said. ‘The overall impact on inflation dynamics is maybe more contained.’

‘Part of this is a terms-of-trade movement’, he said, where ‘import prices are growing a lot more quickly than export prices at the moment.’

‘In Europe the popularity of the euro has gone up quite a bit in surveys’, partly thanks to ‘having a central bank that can act in a fairly energetic way’, he said in other comments.