Governments must spend to enable COVID recovery, says ECB

The European Central Bank must keep borrowing costs down in order to enable governments to spend their way out of a pandemic-induced recession, which threatens to hollow out production capacity, ECB board member Fabio Panetta told Portuguese newspaper Expresso.

“Favourable financing conditions create the best environment for an effective fiscal policy, which in turn creates the conditions for the private sector to also take full advantage of the favourable financing conditions we ensure through our measures,” Expresso quoted Panetta as saying on Friday.

The ECB indicated more policy easing is in the pipeline and said that more emergency bond buys and liquidity facilities for bank are likely to be its instruments of choice.

“There’s a lot more we can do through a combination of our asset purchase programmes and our measures to support the financing of the real economy through banks and the bond market,” Panetta said, adding that there should be no doubts about the ECB’s commitment to act.

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