Eurozone economy is sick, walking “on crutches”


European Central Bank President Christine Lagarde said that the eurozone economy is still standing on “two crutches”, namely monetary and financial stimulus, and that they cannot be withdrawn before a complete recovery.
The remarks are a rare participation from Lagarde in the ongoing policy debate and foretells of a rejection of proposals expressed by some central bankers of the eurozone last week when they talked about starting to reduce the central bank’s purchases of bonds, possibly from July.She said, “None of the crutches, financial or monetary, can be dispensed with until the patient is able to walk well.”

Luis de Guindos, Lagarde’s deputy, made a similar opinion earlier, when he said that “the risks of early withdrawal of measures are higher than the risks of retaining them”.

In March, the European Central Bank boosted bond purchases to contain a yield boom and provide cheap loans to governments, businesses and families amid the fallout from COVID-19.

Eurozone policymakers meet next week, and they are not expected to alter monetary policy, but they may start discussing the future of the bond-buying program.


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