Lagarde: “Serious situation, economy very affected by the second wave”

The second wave of coronavirus is putting pressure on the economy. The President of the ECB, Christine Lagarde, does not hide it: “We continue to face serious circumstances, both from a health and an economic point of view. Pandemics are very rare and unpredictable events, and consequently the economic outlook is characterized by high uncertainty. “An important task falls to governments:” The main challenge for policy makers will be to close the gap until vaccines are in place. an advanced stage and the recovery can gain momentum, “he added.

A passage of his speech is dedicated to Sassoli’s proposal to cancel the debts of the countries with the ECB. I always read with interest everything that the representatives of the EU Parliament and especially the presidents say, my answer is very short: everything that goes in that direction goes against the treaties, there is article 103 that prohibits this type of approach and respect the treaties ”: he said this in response to a question from MEP Marco Zanni.

The outlook for the economy is far from optimistic: “Overall, the euro area economy will be severely affected by the consequences of the rapid rise in infections and the resumption of containment measures, clearly posing risks to the downside for the short-term economic outlook, ”he explains again.

The crisis is general, but there are sectors that are suffering more than others: “The resurgence of Covid infections is weighing in particular on the activity of the services sector – said Lagarde – particularly vulnerable to voluntary and mandatory measures of social distancing”. inserted. The euro area purchasing managers index shows that while manufacturing output continued to improve, activity in the services sector weakened further in October. This uneven impact is also evident in the countries of the euro area, with countries particularly dependent on tourism and travel being the most affected.

Then a passage is dedicated to the Recovery Fund: “Public investments and
Reforms, especially if they are geared towards medium and long-term challenges such as environmental sustainability and digitization, can build a bridge towards a successful and inclusive recovery ”, for this reason“ the next-generation EU package must go live Without delay. The additional resources of the package can facilitate expansionary fiscal policies, especially in the countries of the euro area with limited fiscal space ”.

According to Lagarde, “public investments can positively influence economic growth under current circumstances”, in addition “in times of high uncertainty, public investments increase confidence and therefore tend to have a higher fiscal multiplier. By increasing confidence, a boost to public investment is also likely to stimulate investment by private stakeholders. ”

Public investment and reforms, especially if they are oriented towards medium- and long-term challenges such as environmental sustainability and digitization, can be a bridge to a successful and inclusive recovery. The two together should shape the future of our economies and ensure they adapt to the “new normal” that will materialize once the peak of the pandemic passes. “