ECB’s Stournaras: Cannot Say for Sure We’ve Turned the Page on the Pandemic

10 December 2021

By David Barwick – FRANKFURT (Econostream) – European Central Bank Governing Council member Yannis Stournaras on Friday highlighted the ongoing potential of the pandemic to cause economic damage, and urged avoiding complacency.

In a conference lecture made available by the Bank of Greece, which he heads, Stournaras, said that the pandemic ‘continues to threaten lives, cause high uncertainty, and affect the social well-being of all citizens worldwide.’

Despite progress toward a medical resolution of the pandemic, ‘we cannot yet say for sure that we have turned the page’, he said. ‘The risk of serious mutations, such as the “Omicron” we are currently facing, remains high and may lead to new waves of the pandemic, with serious repercussions for society, but also for the global economy, including the euro area.’

‘Under no circumstances should we be complacent’, he continued. ‘All relevant bodies need to be vigilant for the effective management of the consequences of the pandemic. It is essential that they continue to take steps to restore economic prosperity and promote social cohesion for all euro area citizens.’

The ECB’s pandemic emergency purchase programme (PEPP) ‘is considered very effective in containing the rise, due to high uncertainty, in government bond yields and the divergences between them’, he said. ‘At the same time, the smooth functioning of the monetary policy transmission mechanism is ensured in all euro area countries.’

Making no mention of the ECB’s plans to end the PEPP as of next March, Stournaras said simply that ‘net monthly purchases will last at least until March 2022 and in any case until we judge that the pandemic crisis is over.’

The effectiveness of the PEPP ‘is mainly due to the pioneering flexibility’, he said.

The ECB’s revised monetary policy strategy, he noted, ‘states that, in recognition of the policy interest rate threshold, the Governing Council will use these tools on a case-by-case basis, will continue to respond flexibly to new challenges and will consider new policy instruments when necessary.’

‘For macroeconomic stabilisation to be successful, monetary policy needs to continue to be complemented by targeted and coordinated fiscal measures’, he said. ‘The new strategy recognises the importance of pursuing an anti-cyclical fiscal policy that enhances the effectiveness of monetary policy.’