The president of the ECB unequivocally re-launched the intentions to maintain favorable financial conditions in the euro area, also explicitly referring to interest rates on government bonds. More specifically, he said the institution “is closely monitoring the evolution of nominal yields on longer-term bonds,” given their implications on the cost of bank lending to businesses and households.
“The ECB – he said in his speech at the conference on stability, coordination and economic governance of the European Parliament – will continue to support all sectors of the economy, preserving favorable financial conditions during the pandemic period, as it has done since the beginning of the crisis”. And «this commitment implies looking at indicators on the entire chain of transmission of our monetary policy» including «the costs of refinancing the States», in addition to the provision of bank loans to businesses and households.
Resolutions that have triggered a generalized change of course on the public bond markets, with interest rate mitigations throughout the euro area. The 10-year BTPs closed the session with a drop in yields to 0.60%, where before Lagarde’s words they floated around 0.63%. The spread, the differential with respect to the equivalent German Bund rates, which previously stood at 95-96 basis points, closed at 93. Rates on 5-year BTPs also fell, to 0.02% and those on securities after 2 years at least 0.35%.
According to Lagarde, on the recovery the EU countries must “continue in the team game” put in place against the pandemic crisis and in this context the ECB remains ready to “play its part”. In the EU, “we must push together at all levels to achieve our common goals and ensure that Europe can emerge from the strongest pandemic,” he explained.
Above all because “the pandemic is not over”. And this is a message that at the same conference was also taken up by the EU Commissioner for the Economy, Paolo Gentiloni, who always citing the ECB reiterated that “removing the stimuli too soon is more dangerous than doing it too late”. On this, he announced, in the coming days the EU Commission will publish an update of its guidelines to governments.
Also according to the president of the ECB, “the alignment of policies will continue to be imperative”. And there are two ways in which government budget policies and central bank monetary policy can «reinforce each other: protect the economy – he said – and consequently transform it. While people find hope from the start of vaccination campaigns, the first challenge, to shield the economy, requires us to continue to ferry it until widespread immunity is achieved, “he explained. The second challenge will be precisely the transformation of the economy to preserve its production capacity.
IMF: “Withdrawal of support only after the end of the crisis”
The policies of public support for the economies in the EU countries affected by the Covid-19 pandemic must continue until the crisis is fully recovered, to be gradually withdrawn only subsequently. This was stated today by the executive director of the International Monetary Fund, Kristalina Georgieva, speaking by videoconference at the “European Parliamentary Week” 2021, organized by the European Parliament in Brussels and dedicated to the initiatives for the recovery of the economy after the pandemic.
“Until the pandemic is defeated, support for businesses and families must continue. The gradual withdrawal must follow, not precede – emphasized Georgieva – a lasting exit from the health crisis. It is important internally and also in terms of repercussions: a premature tightening of the policy when the most affected economies are still deeply fragile could exacerbate the divergences between countries ».
“Although now is not the time to withdraw support – added the director of the IMF -, it is time to ascertain the solidity of the insolvency regimes” in the various countries. Massive support in 2020 has led to below-average bankruptcies. But the risk of a higher rate of debt defaults “in the private sector” will increase as support measures decrease “by states” and as structural change accelerates.
“Insolvency settlements and an increased emphasis on equity support could help prevent debt overhangs and escalating bankruptcies,” Georgieva concluded.
(with source Askanews)
Source: RSS DiariodelWeb.it Economia by www.diariodelweb.it.
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