Panetta Says ECB Is Ready to Expand Pandemic Buying If Needed

The European Central Bank is ready to boost its emergency bond-buying program if needed, Executive Board member Fabio Panetta said one day after Germany announced a hard lockdown in response to a surge in coronavirus cases.

The 2021 will likely be a “pandemic year” with high uncertainty and widespread vulnerabilities among companies and households, the Italian told a conference on Monday. Monetary and fiscal policy need to remain accommodative for an extended period of time, he added, calling on governments to focus on investments to boost growth.

The ECB decided last week to increase the size of its pandemic program, known as PEPP, by 500 billion euros ($608 billion) and extend it for nine months through March 2022 in a bid to support the euro-area recovery. The expansion came with a caveat that not the entire amount needed to be spent.

At the time, President Christine Lagarde argued that risks to the economic outlook had become less pronounced -- an assessment that’s probably no longer up to date after Germany decided on Sunday to close all non-essential shops through at least Jan. 10.

“The PEPP envelope can be further expanded and extended, if warranted by the inflation outlook,” Panetta said. “And we stand ready to adjust all our instruments if downside risks to the outlook materialize, including those stemming from exchange rate dynamics.”

Looking beyond the pandemic, the euro area needs to expand at a faster pace as member states will exit this crisis with higher public and private debt levels, “so achieving growth rates that remain higher than interest rates will be crucial,” he added.

©2020 Bloomberg L.P.

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