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Lagarde to urge government action to boost post-COVID-19 economy

Lagarde to urge government action to boost post-COVID-19 economy

dpa
Berlin
European Central Bank chief Christine Lagarde is likely next week to step up the pressure on eurozone governments for fiscal action to help rebuild the region’s economic confidence after the coronavirus crisis.
After unveiling a massive 1.35-trillion-euro (1.52-trillion-dollar) monetary action plan in recent months to underpin the currency bloc’s recovery from the economic devastation wrought by the pandemic, Largarde has already set the stage for a low-key ECB meeting next week.
“We have already done so much,” Lagarde told the Financial Times this week amid signs of a sharp, almost V-shaped economic rebound taking shape in the 19-member eurozone.
Lagarde’s comments helped to confirm market forecasts that the ECB will leave its key interest rates unchanged at historic lows next week, holding its benchmark refinancing rate at 0 per cent.
However, the meeting of the ECB’s 25-strong governing council will come just one day ahead of a two-day summit of European Union leaders, which is set to consider Brussels’ ambitious 750-billion-euro recovery plan for EU member states.
As a result, Lagarde is likely to use her regular press conference on Thursday to step up her calls for political leaders to join the efforts to further promote the European economy’s recovery.
“With the central bank on autopilot for now, the spotlight is on EU leaders to agree on the recovery fund,” said Morgan Stanley economists in a note to clients.
Both the ECB and the EU expect the currency bloc’s economy to contract by a staggering 8.7 per cent this year following the lockdown on economic and public life launched in March in a bid to contain the virus.
Covid-19 flashpoints are still popping up with depressing regularity in parts of the eurozone and across the world.
But signs are also emerging that the eurozone has so far managed to contain the economic fallout from the spread of the virus, which has already killed more than 550,000 worldwide, according to the US-based Johns Hopkins University.
The London-based IHS Markit economic research group said last week that its closely watched purchasing managers index (PMI) measuring economic activity in the eurozone’s service and manufacturing sectors surged at record rate to 48.5 points in June from 31.9 in May.
Driven by gains in the eurozone’s two biggest economies, Germany and France, the rise in the June PMI took the index back up close to the key 50-point level, which marks out the difference between shrinking and expanding economic activity.
“The upturn signals a remarkably swift turnaround in the eurozone economy’s plight amid the Covid-19 pandemic,” said IHS Markit’s chief business economist Chris Williamson.
Industrial production in the eurozone’s four biggest economies, which also include Spain and Italy, also chalked up robust gains in May, adding to economic hopes for the region.
In addition, eurozone inflation edged higher in June after hitting a four-year low in May as economies across the currency bloc began to re-open and ease lockdown restrictions.  Annual consumer prices in the bloc rose 0.3 per cent in June, but still fell well short of the ECB’s target of an inflation rate of just below 2 per cent.
Signs of a dramatic improvement in the economic picture have also given Lagarde the chance to return to themes she outlined at the start of her presidency six months ago, notably the ECB playing a more active role in the battle against global
warming.
“I want to explore every avenue available in order to combat climate change,” she told the Financial Times. “This is something that I hold very strongly.” Lagarde went on to say that the ECB “has to look at all the business lines and the operations in which we are engaged in order to tackle climate change, because at the end of the day, money talks.”

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