Europe must deliver on stimulus now, says central bank chief

FRANKFURT — Europe must focus on delivering agreed fiscal stimulus measures soon to pull the bloc out of the crisis, European Central Bank President Christine Lagarde said Thursday.

“All of us should put all the energy we have, making sure that we deliver and that implementation follows through as quickly as possible without too much procrastination,” Lagarde told the European Parliament’s economic and monetary affairs committee.

Lagarde said the size of Europe’s fiscal stimulus is “not that far away” from the United States’ when taking national measures and automatic stabilizers into account.

But while the U.S. has launched its massive $1.9 trillion stimulus package, the package of €750 billion agreed at EU level last summer is yet to start flowing. National parliaments still need to ratify the legal changes required to finance the EU fund.

In the meantime, the U.S. and Europe are heading for a two-speed recovery, as evidenced by the latest economic forecasts. On Wednesday, Germany’s economic advisers trimmed their outlook to 3.1 percent, warning of vaccination slowdown in Europe, while the Federal Reserve projected the U.S. economy will grow 6.5 percent this year.

Turning to the ECB’s own policy measures, Lagarde affirmed that the ECB will not tolerate a rise in yields that is seen as tightening financing conditions prematurely.

“While we believe that 2021 will be the year of recovery, we don’t see it happening until the second half of 2021. And we believe that any yield increase could operate as a bit of a break, which would be undesirable,” Lagarde said.

She cautioned investors against reading any lack of commitment into the central bank’s weekly bond-purchasing data. The ECB last week said it would “significantly” increase bond buys in the near term to stem a rise in yields.

“While records of our weekly purchases will continue to be distorted by short-term noisy factors — such as occasionally lumpy redemptions — the step-up in the run-rate of our program will become visible when ascertained over longer time intervals,” Lagarde told MEPs.