ECB recovery package: from billions to trillions
In the bid to minimise the economic repercussions of the pandemic, the ECB has decided to increase its bond purchases by 600 billion euros. The emergency programme is now worth 1.35 trillion euros and has been extended until the end of June 2021. The aim is to bolster states and also companies, which will be able to offer lower interest rates on their stocks. An appropriate response or overkill?
Europe's new dynamism
Even if obstacles remain, the EU is making good progress, comments L'Echo:
“The EU Commission's package, which provides for joint debt, has yet to win the approval of the Northern European countries. And that will not be easy. When it comes to the ECB it seems that Christine Lagarde has been dancing on eggshells ever since her faux pas on 12 March when she said that the ECB was not there to minimise interest rate differentials between the euro countries, which caused interest rates on Italian government bonds to soar. Regardless of what its president says, the ECB must also take into account the Federal Constitutional Court's recent ruling. ... But let's not be petty. Even US commentators are expressing their amazement at Europe's newfound dynamism. And that's already a major victory. Thank you, Angela, Christine and Ursula.”
Fitting response to historic crisis
Der Tagesspiegel welcomes the move:
“We are currently experiencing the worst economic crisis since the postwar period. We cannot risk another euro crisis. But that is exactly what would happen without the ECB intervention: risk premiums on government bonds from countries like Italy would soar, the country would go bankrupt and the euro would collapse. It therefore makes perfect sense that the ECB should respond to this historic crisis with a historic rescue programme. And the ECB purchasing programme is not only supporting states but also businesses. The central bank is buying some of their bonds and thus helping them to refinance themselves. But one thing must be clear: it is neither the ECB's job to manage this crisis nor can it do so alone. The states themselves are called upon to stimulate their economies with their own spending.”
Zombies may be heading our way
The bond-buying programmes for rescuing states and companies have not been properly thought through, Contrepoints argues:
“Not all companies will survive an external economic shock. It is justified for the state to intervene by guaranteeing the financing of the healthiest companies that ran into difficulties during the lockdown. But the fact that aid is being provided indiscriminately could mean that nonviable companies are also saved. In this respect sweeping aid programmes like the ECB's will have a detrimental long-term impact on the economy. ... The distortion of reality will result in an even more painful awakening when people realise that the bubble won't last forever ... Beware, a zombie economy is looming!”
Political infighting causing standstill
Instead of getting bogged down in domestic political infighting Spain should start focusing on how to best make use of the ECB's funds, editor-in-chief Jordi Joan cautions in La Vanguardia:
“Like the ECB, the German government is opening up its savings reserves, and yesterday announced a 130 billion euro economic stimulus package. Italy and France have already signalled their willingness to spend huge sums of money. So what about Spain? This is the big question on everybody's mind today. We need an earnest, reflective and cross-party debate on what to do with all the money. The ECB's measures also confirm the urgency of the situation. Yet it seems that right now Spain is entirely preoccupied with the dismissal of a Civil Guard chief and participation in the feminist demonstration on 8 March.”