Austerity is dead – and another reminder could send the euro higher once again. Christine Lagarde, President of the European Central Bank, is set to testify today and remind investors that both monetary and fiscal stimuli have been ramped up – to the delight of bulls.
Last Thursday, the ECB announced it is adding €600 billion to its Pandemic Emergency Purchase Program (PEPP) – its newest bond-buying scheme that has fewer limitations than previous ones. Moreover, the Frankfurt-based institution will reinvest the proceeds and maintain the scheme through at least June next year. The bank’s firepower lowers the government’s borrowing costs – Italian yields collapsed in response – and boost the economies.
Lagarde’s largesse came one day after Germany kicked off a €130 billion fiscal package, beating estimates and buying its conservative expenditure stance. The move by Europe’s largest country serves as an example to others. While the eurozone’s one-two punch remains modest in comparison to America’s multi-trillion action, it is a significant shift.
Lagarde’s testimony before the European Parliament will likely include calls for governments to do more to speed up the recovery from the crisis. The continent continues its gradual reopening with cases and deaths from coronavirus extending their decline.
Source: Financial Times
Comments
Log in or sign up to join the conversation.