European Central Bank (ECB) president Christine Lagarde has urged EU countries to solve their disagreements over the €750bn (£670bn) recovery fund, amid fears that delays could damage economies facing a tough winter of rising coronavirus cases.
Lagarde told the European Parliament that the budget package – which amounts to around €1.8 trillion overall – “must become operational without delay”.
Her comments come after Hungary and Poland blocked the adoption of the 2021-2027 budget and recovery fund. The two countries disagree with a clause that says countries must respect the rule of law.
EU leaders have long accused Hungary and Poland of undermining the freedom of the press and courts. European leaders said they hope to work out a solution in the coming weeks.
Lagarde told the EU Parliament’s economics committee today that “the euro area economy is expected to be severely affected by the fallout from the rapid increase in infections and the reinstatement of containment measures”.
She said this posed “a clear downside risk to the near-term economic outlook”.
Bank to keep rates low for longer
The European Central Bank’s next policy decision comes on 10 December. Analysts expect the Bank to ease monetary policy to try to support lending and push up stubbornly low inflation.
“The key challenge for policymakers will be to bridge the gap until vaccination is well advanced and the recovery can build its own momentum,” Lagarde said.
She suggested that the ECB will do all it can to keep borrowing costs at their current record low level.
Lagarde said: “When thinking about favourable financing conditions, what matters is not only the level of financing conditions but the duration of policy support, too.”