LONDON – European Central Bank President Christine Lagarde hopes that 2021 will still be the year of post-pandemic economic recovery, despite rigid blocks and concerns over the new Covid-19 variants.
“Our hope is that 2021 will still be the year of recovery, but in two phases and phase one is clearly one in which it is still plagued by a high level of uncertainty,” said Lagarde in a panel moderated by CNBC at the summit of the Agenda for Davos on Monday.
The eurozone is battling an increase in coronavirus cases, severe social restrictions and a slow distribution of vaccines. This is creating more economic problems for the region, which is estimated to have contracted more than 7% in 2020.
According to Lagarde, the current economic environment “remains to be crossed over the bridge for recovery, but where the route seems a little delayed, but it should not be derailed”.
The eurozone entered the new year facing an intensification of restrictions on coronavirus: France intensified its curfew, Germany extended its national blockade until mid-February, the Netherlands also announced a new curfew and other countries decided to close schools .
The latest variants of Covid-19 are a concern for lawmakers as they have contributed to a greater number of daily infections – in some cases worse than during the first wave of cases in spring 2020.
It is not the same economy.
Christine Lagarde
President of the ECB
European countries started vaccinating citizens in late December, but implementation has been criticized for being too slow. In the latest escalation, the European Commission, the institution that negotiates vaccine contracts on behalf of the 27 EU governments, confronted AstraZeneca on Monday for its delay in delivering its vaccines.
The pharmaceutical giant, whose vaccine may receive approval in the EU later this week, informed the Commission on Friday that it will deliver fewer doses in the coming weeks. This could become another headache for European governments looking to increase the number of daily vaccinations.
The president of the European Central Bank (ECB), Christine Lagarde, gesticulates when giving a press conference on the outcome of the meeting of the Governing Council in Frankfurt, Germany, on 12 March 2020.
Kai Pfaffenbach | Reuters
The stimulus remains
The latest ECB economic data point to a contraction in the last quarter of 2020, which, according to Lagarde “will have an impact in the first quarter of 2021”.
In December, the ECB estimated a rate of 3.9% of GDP for 2021 and 2.1% for 2022, but these forecasts depend heavily on how the pandemic evolves and how quickly citizens can be vaccinated.
Even when the European region reaches a point where its economies will be able to fully reopen, there will be more challenges to ensure solid economic growth. “It is not the same economy we are talking about,” added Lagarde.
The ECB decided last week to keep its vast monetary stimulus unchanged. Its Pandemic Emergency Purchase Program, which may last until March 2022, can buy up to 1.85 trillion euros ($ 2.25 trillion) in bonds. This exercise is helping to keep borrowing costs lower for eurozone governments. Central bank interest rates also remain at historic lows to further boost lending in the region.