(Bloomberg) -- European Central Bank President Christine Lagarde said governments risk delaying the rebound from the coronavirus slump if they end support prematurely.
The eventual withdrawal of fiscal aid such as furlough programs for workers is a source of uncertainty and it must be carefully aligned with a pickup in activity, Lagarde said in an interview with GZERO Media, a subsidiary of the Eurasia Group political risk consultancy.
“Will there be a gradual phasing out? Is the phasing out going to be synchronized with the pickup of the economy? Those are the big sort of more economic questions and financial questions that impair this recovery at the moment,” she said.
“This very subtle synchronization that is needed will be the trigger to either success or very slow-going recovery,” she added. The further course of the pandemic and the availability of a vaccine are the other major sources of uncertainty, according to Lagarde.
Governments across Europe unleashed unprecedented support in the wake of lockdowns to alleviate the plunge in economic activity. Many firms in the services sector are expected to suffer for longer, putting pressure on governments to keep up stimulus despite rising costs.
The U.K. became the latest country to extend its crisis measures on Thursday after it announced it will subsidize wages for part-time workers, extend loans for companies affected by lockdown rules, and cut sales taxes for longer. Germany recently allocated around 10 billion euros ($11.6 billion) to extend its short-time work program until the end of 2021.
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