“The European Central Bank will be present in the markets at least until March 2022 and until favorable financial conditions are ensured,” President Christine Lagarde assured today. This means that the Central Bank will exhaust the mammoth bond purchase program (in which Greek bonds also participate) amounting to 1,850 trillion. euro.
The head of the ECB, speaking after the meeting of the Board of Directors of the Bank, pointed out that the risks due to the pandemic remain. However, despite the second wave and the lock-down that followed, the ECB currently maintains its forecast for EU GDP growth of 3.9% this year. As Christine Lagarde explained, this forecast had largely incorporated these developments since last December. Of course, in any case, the ECB, as she stressed, is ready to act by adjusting its “arsenal” accordingly. In addition, he explained, there have been some positive developments that could help alleviate uncertainty. In particular, an agreement was reached on Brexit, the slow pace of vaccinations is an additional element and, finally, the progress made in the operation of the Next Generation EU, which will finance the recovery of the economy . Regarding the Fund, Kr. Lagarde stressed the need to make it operational without delays.
The President of the ECB brought the issue of budget support back to the forefront, arguing that it remains a critical parameter for the course of the European economy. He even called on governments to work together. He warned, however, that emergency fiscal measures taken by governments in response to the recession caused by the pandemic should, as far as possible, remain targeted and in any case be temporary.
She described the recovery in the Eurozone as unequal. He added that the activity in the processing sector is recovering sufficiently, but the same is not the case with the services sector “.
Regarding bank lending, Ms. Lagarde acknowledged that the data available to the ECB for the fourth quarter of 2020 indicates a tightening of lending conditions, mainly to businesses. He attributed it mainly to the increased credit risk faced by banks in a context of ongoing uncertainty about loan terms and conditions, as well as their concerns about the borrower's creditworthiness. Banks surveyed, she said, also reported a drop in corporate loan demand in the fourth quarter. On the contrary, this research also showed a further increase in net household demand for home loans in the fourth quarter, although banks apply even stricter criteria for loan approvals.
Finally, Kr. Lagarde reiterated that the ECB will continue to monitor the euro exchange rate closely, as it affects the course of inflation.