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ECB’s Lagarde confident on outlook despite virus surge

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President of the European Central Bank (ECB) Christine Lagarde holds her smartphone as she attends the One Planet Summit, part of World Nature Day, at the Reception Room of the Elysee Palace, in Paris, on January 11, 2021. – The One Planet Summit, a largely virtual event hosted by France in partnership with the United Nations and the World Bank, will include French President, German Chancellor and European Union chief. (Photo by Ludovic MARIN / POOL / AFP)

European Central Bank president Christine Lagarde said Wednesday that she remained confident of the eurozone’s recovery in 2021, despite renewed virus curbs and a challenging start to vaccination programmes.

The ECB’s forecasts remain “very clearly plausible”, Lagarde said at an online conference hosted by Reuters, adding she had “no reasons to believe our forecast is wrong at this point in time”.

The ECB in December forecast economic growth in the 19-nation euro area at 3.9 percent in 2021, after a fall estimated at 7.3 percent in 2020.

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A resurgence in Covid-19 cases has seen several eurozone nations impose tougher coronavirus restrictions, dampening economic expectations at the start of the year, while vaccination rollouts, which Lagarde described as “laborious”, have faced criticism.

However, the ECB’s forecasts are “predicated on lockdown measures until the end of the first quarter,” Lagarde said.

She cautioned that it would become “a concern” if member states need to extend their shutdowns “after the end of March”.

But Lagarde said some uncertainties — which she called “dark clouds over our heads” — have been cleared, including a post-Brexit trade deal, and the outcome of Senate races in the US state of Georgia giving Joe Biden more legislative stability as president.

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“From that basis we start on a more positive basis,” Lagarde said.

Lagarde also welcomed the EU-wide agreement on its 750 billion euro ($913 billion) coronavirus recovery fund and reiterated pleas for fiscal policy to support monetary efforts.

“Stimulus needs to be continued and properly targeted to those measures that would be most conducive to growth,” said Lagarde, a former French finance minister and ex-head of the International Monetary Fund.

At its last monetary policy meeting in December, the Frankfurt-based ECB boosted its pandemic emergency bond-buying programme to 1.85 trillion euros and extended it to March 2022.

The ECB’s governing council meets next week to discuss future monetary policy moves.

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