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Tag: Eurozone

  • Eurozone in fresh emergency action to boost economy

    The European Central Bank has taken further dramatic measures try to boost the eurozone economies, amid their biggest recession since World War Two.

    Just months after emergency measures, the central bank said it would increase the size of its bond buying programme by €600bn (£546bn) to €1.35tn.

    The programme will run until June 2021, six months longer than planned.

    The move will keep borrowing costs low for countries and firms as they face huge budget deficits and recessions.

    The purchases support “funding conditions in the real economy, especially for businesses and households,” the ECB said.

    The central bank also decided to hold its interest rates at record lows.

    The extra bond buying “is likely to push European government bond yields even further into negative territory, and investors in search of positive returns will be forced to take more risk,” said Rachel Winter, associate investment director at investment firm Killik & Co.

    The bond purchases are often referred to as Quantitative Easing (QE). When central banks buy bonds with printed money, the value of the bonds rise and borrowing costs drop.

    Some market commentators wonder how much money can safely be printed without causing the value of money to decrease.

    ‘Fiscal box’

    “Although inflation is currently very low, these levels of asset purchases are causing some concern about inflation further down the line,” said Ms Winter.

    “Economic theory tells us that that inflation is linked to the supply of money in the economy, and if the money supply is being drastically increased to fund quantitative easing then long-term inflation ought to rise too. These fears of long-term inflation have stoked demand for gold recently.”

    Gold is trading at about $1,717 (£1,368) an ounce, down from highs of $1,766 earlier in the month, but up compared to a price of $1,324 one year ago.

    In many ways, the ECB is playing catch-up with other central banks, said Neil Williams, senior economic adviser at US-based money manager Federated Hermes.

    “After lagging the US and UK, the fiscal box is now opening, he said. The planned spending works out at about €100bn a month, higher than the €80bn spent in the wake of the European sovereign debt crisis, he points out.

    Source: bbc.com

  • Coronavirus: Italy PM Conte says lockdown exit plan coming

    Italy will announce its plan to gradually exit its lockdown by the end of this week, Prime Minister Giuseppe Conte said.

    In a Facebook post, Mr Conte said the country could not give up its policy of “maximum caution”, and said Italy would reopen in line with “serious scientific policy”.

    “A reasonable expectation is that we will apply it from May 4,” he said.

    Italy has reported 24,114 deaths, the highest recorded toll in Europe.

    Data released on Monday showed the number of people officially confirmed as infected with coronavirus had dropped for the first time since the outbreak began. Italian authorities said the symbolic drop of 20 cases was a “positive development”.

    The third-largest economy in the eurozone has been under lockdown measures since 9 March, brought in to tackle the spread of the virus.

    Countries across Europe are slowly beginning to ease the restrictions, on businesses and on education. There is however no coordination between states.

    Some countries like Denmark have already reopened primary schools, while Spain’s government is discussing on Tuesday how to ease its tight restrictions and allow children outside.

    What did Italy’s PM say?

    Mr Conte posted his statement on Facebook on Tuesday morning, insisting the government is working non-stop to coordinate moves towards “phase two” of its lockdown – “coexistence” with the virus.

    “I would like to be able to say, let’s open everything. Right away,” he wrote. “But such a decision would be irresponsible. It would make the contagion curve rise uncontrollably and would jeopardise all the efforts that we’ve made until now.”

    “The easing of measures must take place on the basis of a well-structured and articulated plan,” he said, adding that Italy “cannot abandon the line of maximum caution”.

    Current national quarantine restrictions officially expire on 3 May. Mr Conte said he would announce the plan for how to leave the lockdown “before the end of this week”.

    “A reasonable prediction is that we will apply it from 4 May,” he concluded.

    What about other European lockdowns?

    Many European nations have slowly started to ease restrictions this week, with Germany, Austria, Denmark and the Czech Republic among countries to allow certain businesses to reopen.

    There is however no coordination at an EU level, and countries are reopening at different rates.

    Denmark was the first in Europe to allow pupils back in the classroom, with students under the age of 12 returning to education last week.

    Norway allowed kindergarten students to return on Monday, provided they bring their own lunches and follow new hygiene rules.

    But older students across Europe remain at home. France has officially extended its nationwide lockdown until 11 May, but even after then schools are not expected to return immediately.

    “On May 11, we are not going to have all the students enter the classroom, as if we were resuming normally,” the education minister Jean-Michel Blanquer said on Tuesday.

    Primary schools will likely return that week, followed by final year students from 18 May and all pupils from 25 May, he said.

    Spain has implemented one of the strictest lockdowns. Children of any age there are not currently allowed outside for any reason.

    The government is expected to ease those measures on Tuesday, with reports suggesting those under 12 years old will be allowed out under tight restrictions.

    Source: bbc.com