While expressing hope that the worst phase of the impact of the novel coronavirus pandemic on the world would be over, Christine Lagarde, the president of the European Central Bank, said that it is unlikely that the world and its economy would return to its former status quo.
A recovery “is going to be incomplete and might be transformational,” she said and reiterated that tings in the world will not be the same after the pandemic.
She believed that for some forms of business models, surviving in the new post pandemic world will be a struggle while there would be emergence of other forms of businesses which will address and cater to the changed situation and reality. “It is likely that trade will be significantly reduced” in a world where proximity might take over, Lagarde said.
“We need to be extremely attentive to those that are most vulnerable,” she added.
An expansion in size and duration of its emergency bond-buying program was announced earlier this month by the European Central Bank. The central bank of the European Union has purchasing buying 1.35 trillion euros in government debt at least until June 2021.
A review of the effectiveness of its monetary policy was debated upon by the ECB, according to the meeting minutes of the bank released on Thursday, in order to address concerns raised by the German constitutional court. The court has ruled in May that some aspects of the policy of the central bank were not legal.
“There was ample evidence that the euro area economy would have fared much worse without the policy stimulus from asset purchases,” said the policymakers at their meeting.
“Central banks have responded massively to the challenge. There is no question in my mind that we need to use all tools available,” added Lagarde while speaking on the issue on Friday.
A new fiscal stimulus, based on a proposal put forward by the European Commission in May, is being negotiated by the European leaders aimed at addressing the current economic crisis. The fiscal stimulus package includes raising 750 billion euros from public markets. Originally, the European Union wanted to distribute 500 billion in the form of grants and the rest 250 billion in loans.
But the proposed plan has caused a virtual division among the European leaders. He leaders are due top debate and negotiation on the new proposed plan once again on July 17 at a physical meeting in Brussels, Belgium.
That summit is unlikely to result in a final agreement between the European leaders, Lagarde said on Friday, and added that there will be need for hold more negotiations on the issue before the new fiscal stimulus can be deployed.
(Adapted from CNBC.com)