The ECB said in a statement that it will respond “as appropriate” to the situation unfolding at its next meeting in December, ensuring that “financing conditions remain favorable to support economic recovery and counteract the negative impact of the pandemic ”on inflation.
During a press conference, ECB President Christine Lagarde made it clear that the central bank was ready to act.
“Information received indicates that the economic recovery in the euro area is losing momentum faster than expected after a strong but partial and uneven rebound in economic activity over the summer months,” said Lagarde. The central bank is currently evaluating its toolkit to determine how best to provide additional economic assistance, she said.
The central bank is widely expected to add billions more to its $ 1.35 trillion asset purchase program, which coincides with the € 800 billion coronavirus recovery fund ( $ 938 billion) from the European Union and allowed even heavily indebted countries like Italy to borrow interest-free money. .
France will begin a four-week national lockdown starting next Monday. Non-essential shops, restaurants and bars will be closed, and people will only be allowed to leave their homes to go to work, care for loved ones, keep a medical appointment, visit the grocery store or exercise. The lockdown of France will last until December 1 “at a minimum”, said President Emmanuel Macron.
In Germany, bars, restaurants and cafes will close from Monday, except for take-out services. Theaters and concert halls will cease to function, as will amateur sports and recreational facilities. Schools will remain open in both countries.
Lagarde said on Thursday that such measures had triggered a “sharp deterioration” in the short-term economic outlook, complicating past projections that the region’s economy would continue to grow in the last three months of the year.
“It’s very difficult to predict how December will compensate for November,” she said. “But we don’t expect good numbers for November, obviously. ”
In the meantime, Lagarde has made it clear that the ECB is ready to take dramatic action, as it did when the pandemic triggered lockdowns in March. She pointed out that the central bank still has a lot of tools at its disposal.
“The ECB was there for the first wave,” she said. “The ECB will be there for the second wave. ”
Following his press conference, analysts said there were only two real questions left: what kind of help will come and how big the package will be.
Business activity in Europe was already in decline before tougher measures were announced, according to the latest purchasing managers index from IHS Markit, giving hope that major European economies will contract in the last quarter of 2020 .
Allianz economists warned earlier this month of “a high risk of a double-dip recession in countries that again resort to targeted and regional lockdowns.”
– Fred Pleitgen, Tara John and Claudia Otto contributed reporting.