(Bloomberg) -- The mix of grants and loans in Europe’s rescue package could have been better, according to European Central Bank President Christine Lagarde.
The 750 billion-euro ($868 billion) stimulus deal struck by European Union governments this week “is clearly a demonstration of solidarity, of transfer to those that need it most,” she said in a Washington Post Live event on Wednesday.
The allocation of loans and grants in the package is a “good balance,” Lagarde said. “It could have been better, but it’s a very ambitious project actually.”
The comments suggest similar concerns to those European Union governments who advocated for a larger share of grants in the recovery fund, arguing that more debt would be difficult for some member states. While the initial proposal foresaw 500 billion euros in grants and 250 billion euros in loans, the final version lowered the level of grants to 390 billion euros.
The package has nonetheless been widely praised by policy makers and investors for sending a signal on the region’s common resolve and providing a fiscal reinforcement to the ECB’s efforts to shore up growth. The central bank, for its part, has pledged to spend well over a trillion euros on emergency asset purchases across the next year, and is expected to boost support again in coming months.
While some ECB officials have pointed to the possibility of the euro area’s contraction turning out less severe than initially anticipated, Lagarde stressed that prospects for a recovery are still “uneven” and “uncertain.”
Recent figures on the economy suggest the ECB’s baseline forecast for a contraction of nearly 9% this year “is probably in the right place.”
©2020 Bloomberg L.P.
RECOMMENDED FOR YOU
POPULAR