ECB’s Lagarde Urges Fiscal Action in First Remarks of 2020

(Bloomberg) --

European Central Bank President Christine Lagarde used her first public remarks of 2020 to push for greater coordination between the region’s policy makers, arguing that a joint fiscal push would help jump-start the sluggish economy.

“A concerted fiscal stimulus at the euro-area level would help speed up growth,” Lagarde said in interview with French magazine Challenges. “Greater cooperation between competent authorities, without infringing on the independence of their roles, would make it possible to optimize the multiplier effects of their decisions.”

The comments come after a flurry of data at the start of the year that showed a mixed outlook for the 19-nation economy. The euro zone has been mired in a manufacturing slump for more than a year -- most prominently in Germany -- amid uncertainties including the U.S.-China trade war and Brexit.

Manufacturers’ expectations for demand and employment weakened further at the end of 2019, indicating a turnaround might still be some way off. The services sector has so been the main motor of a subdued expansion.

In an interview in which she defended negative interest rates, promised that the ECB would “play our part” in the fight against climate change, and said it will assess the costs and benefits of issuing a central bank digital currency, Lagarde warned of plenty of risks ahead.

While acknowledging that Britain’s departure from the European Union at the end of this month will mean “one less uncertainty,” she said the biggest challenge -- reaching a trade deal -- is yet to come. She also said there’s a risk that geopolitical tensions could worsen the economic situation internationally.

“Both within the euro area and globally, the biggest threat is a downturn in trade resulting from a range of uncertainties, primarily affecting manufacturing and hampering investment,” she said.

The ECB next meets to set monetary policy on Jan. 23.

To contact the reporter on this story: Carolynn Look in Frankfurt at clook4@bloomberg.net

To contact the editors responsible for this story: Paul Gordon at pgordon6@bloomberg.net, Lucy Meakin

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