Connect with us

EU

#ECB ramps up stimulus in virus fight but stops short of rate cut

Guest contributor

Published

on

The European Central Bank approved fresh stimulus measures on Thursday (12 March) to help the ailing euro zone economy cope with the shock of the coronavirus pandemic but unexpectedly kept interest rates on hold, a decision that may dismay markets, write Balazs Koranyi and Francesco Canepa.

With millions of people in lockdown, financial markets in freefall and companies struggling with disrupted supply chains, the ECB said it would give businesses more ultra-cheap loans, raise asset purchases and provide banks with capital relief to cope with the downturn.

“These operations will support bank lending to those affected most by the spread of the coronavirus, in particular small and medium-sized enterprises,” the ECB said in a statement.

“A temporary envelope of additional net asset purchases of 120 billion euros will be added until the end of the year, ensuring a strong contribution from the private sector purchase programmes.”

Its move follows emergency rate cuts by the U.S. Federal Reserve and the Bank of England, highlighting fears among policymakers that the epidemic could push the global economy into recession and threaten the sort of disruption last seen in the 2008 global financial crisis.

The ECB said it would offer a previous longer-term refinancing operation at a rate as cheap as minus 0.75% and conduct additional longer-term refinancing operations to provide immediate liquidity support to the euro area financial system.

But the deposit rate will stay unchanged at a record low minus 0.5%, suggesting policymakers believe it may already be near the so-called reversal rate, where further cuts are counterproductive because they hurt bank margins to the point of thwarting lending.

The euro zone’s central bank kept the door open to further rate cuts, keeping its interest rate guidance unchanged.

In addition to the ECB’s moves, its separate bank supervision arm said it would offer lenders temporary capital and operational relief in reaction to coronavirus.

Bank can fully use capital and liquidity buffers, including Pillar 2 Guidance and will benefit from relief in the composition of capital for Pillar 2 Requirements, the supervisor said.

The ECB’s move comes a day after the World Health Organization called the coronavirus a pandemic for the first time, saying other countries would soon join Italy and Iran on the frontline of the disease.

US President Donald Trump meanwhile imposed restrictions for one month on travel to the United States from 26 European countries.

While policymakers insist the financial sector is sound and there will not be a repeat of the 2008 crisis, European stocks have dropped 28% in the past few weeks with banks .SX7P taking an even bigger hit of 35%.

German bond yields have meanwhile tumbled to DE10YT=RR minus 0.80% as investors seek safety, piling pressure on the ECB to cut rates even further.

SPEND, SPEND, SPEND

Lagarde, who has encouraged ECB staff to work from home if they wish to, has repeatedly told governments to act quickly on the virus because passivity could lead to calamity on a par with the global financial crisis.

“In light of rapid developments, working on responses on all fronts to tackle #coronavirus impact,” European Commission chief Ursula von der Leyen said in a tweet on Thursday.

“Assessment with scientists, coordination of health and border measures, provision of protective equipment, package to prop up the EU economy.”

Many economists expect Germany, Europe’s economic powerhouse, to be in recession in the first half of this year and some predict a similar outturn for the entire bloc.

While the ECB’s stimulus suggests it is keen to help, it has already used up its most powerful weapons in nearly a decade of stimulus. Interest rates are at record lows, it has gobbled up 2.6 trillion euros ($2.94 trillion) of mostly government debt, and has for years offered essentially free cash to banks to keep them lending.

Low rates may also be sowing the seeds of the next crisis as they compress bank margins and fuelling housing bubbles.

Compounding the ECB’s headache, oil prices have crashed, a double-edged sword for rate-setters.

While lower crude prices boost growth and consumer purchasing power through lower fuel prices, they also drag inflation sharply lower — a problem as the ECB has undershot its target of almost 2% since 2013.

Some economists expect inflation to fall to zero this spring if crude prices stay at current levels, raising fears of a damaging deflation spiral.

The ECB will also release economic forecasts on Thursday as it does every three months, though the cut-off date for their underlying assumptions was before the worst of the market turmoil and the oil price crash.

coronavirus

EU has not yet ordered more AstraZeneca vaccines, says internal market commissioner

Reuters

Published

on

By

Syringes are prepared to administer the AstraZeneca coronavirus disease (COVID-19) vaccine at a new mass vaccination centre in WiZink sports arena in Madrid, Spain, April 9, 2021. REUTERS/Sergio Perez

The European Union has not yet made any new orders for AstraZeneca (AZN.L) vaccines beyond June when their contract ends, European Internal Market Commissioner Thierry Breton (pictured) said on Sunday (9 May).

Breton also said he expected that the costs of the EU’s recent order for more doses of Pfizer-BioNTech (PFE.N) vaccines would be higher than the earlier versions.

The Commission last month launched legal action against AstraZeneca for not respecting its contract for the supply of COVID-19 vaccines and for not having a “reliable” plan to ensure timely deliveries.

"We did not renew the order after June. We’ll see what happens," said Breton, adding that it was "a very good vaccine".

Concerns has risen on potential side-effects of the Anglo-Swedish COVID-19 vaccine.

Europe's medicines regulator said on Friday it is reviewing reports of a rare nerve-degenerating disorder in people who received the shots, a move that comes after it found the vaccine may have caused very rare blood clotting cases. Read more.

Breton said an increase in prices for second generation vaccines could be justified by the extra research required and potential changes to industrial equipment.

The European Union signed a new contract with Pfizer-Biontech to receive 1.8 billion doses of COVID-19 vaccines for 2021-2023, to cover booster shots, donations and reselling of doses, the European Commission said on Friday (7 May). Read more.

“There may be a little extra cost but I will let the competent authorities unveil it in due course,” he told France Inter radio.

Continue Reading

EU

Conference on the Future of Europe: Make your voice heard

EU Reporter Correspondent

Published

on

logo

The Executive Board approved on 9 May the Rules of Procedure that set out the composition of the Plenary of the Conference on the Future of Europe, and how it will work.

The text approved on Europe Day 2021 will complete the rules determining how the Conference Platform, Panels and Plenary can transform citizens' priorities, hopes and concerns into actionable recommendations. It adds to the rules previously adopted concerning the working methods of the Executive Board and those related to citizens' participation.

On the same day, the European Parliament in Strasbourg hosted the inaugural event of the Conference on the Future of Europe. Watch it here.

Ensuring that citizens' input will be taken into account

The Conference Plenary will be composed of 108 representatives from the European Parliament, 54 from the Council (two per member state) and three from the European Commission, as well as 108 representatives from all national Parliaments on an equal footing, and citizens. 108 citizens will participate to discuss citizens' ideas stemming from the Citizens' Panels and the Multilingual Digital Platform: 80 representatives from the European Citizens' Panels, of which at least one-third will be younger than 25, and 27 from national Citizens' Panels or Conference events (one per member state), as well as the president of the European Youth Forum.

Some 18 representatives from both the Committee of the Regions and the European Economic and Social Committee, and another eight from both social partners and civil society will also take part, while the High Representative of the Union for Foreign Affairs and Security Policy will be invited when the international role of the EU is discussed. Representatives of key stakeholders may also be invited. The Conference Plenary will be gender-balanced.

Their exchanges will be structured thematically around recommendations from the Citizens' Panels and input gathered from the Multilingual Digital Platform. The Platform is the single place where input from all Conference-related events will be collected, analysed and published. In due course, the Plenary will submit its proposals to the Executive Board, who will draw up a report in full collaboration and full transparency with the Plenary and which will be published on the Multilingual Digital Platform.

The final outcome of the Conference will be presented in a report to the Joint Presidency. The three institutions will examine swiftly how to follow up effectively to this report, each within their own sphere of competences and in accordance with the Treaties.

Parliament's Co-Chair of the Executive Board Guy Verhofstadt said: “We want to create real momentum from the bottom up. The Conference will be much more than a listening exercise, but a way to truly include citizens in mapping out our shared European future. The foundations have been laid: digital and deliberative democratic experiments that have never been tried on an EU-wide scale. We will guarantee that their concerns and proposals will then get a political answer. It's new and exciting, and it starts today.”

The Portuguese Secretary of State for EU Affairs and Co-Chairwoman from the Presidency of the Council of the EU, Ana Paula Zacarias, said: “Coming from Porto to Strasbourg, to celebrate Europe Day and the launching of the Conference on the Future of Europe, the words of President Mario Soares came to my mind when back in 1976 he defended: ‘to rethink Europe and its future is a permanent duty of all Europeans. A joint endeavour that needs to be taken forward with humbleness facing the historic relevance of our common goals."

Commission Vice President for Democracy and Demography and Co-Chairman Dubravka Šuica, said: “This Conference is an unprecedented exercise for the EU. We are creating a space where citizens can debate on a par with elected representatives to spell out the future of Europe. This has never been tried before, but we are confident that this will strengthen both our European Union and our representative democracy. And there is no better date to celebrate that than on 9 May.”

Next steps

The Executive Board will soon set the date for the first Conference Plenary meeting. Preparations for the Citizens' Panels are underway, while the number of participants and events on the Conference's Multilingual Digital Platform continue to grow. The Conference is committed to give maximum space to young people and in this vein, preparations for the European Youth Event organised by the European Parliament in October also continue.

More information

Digital Platform for the Conference on the Future

Questions & answers on the multilingual digital platform for the Conference on the Future of Europe

Charter of the Conference on the Future of Europe

Continue Reading

coronavirus

EU calls on US and others to export their vaccines

Reuters

Published

on

By

European Commission President Ursula von der Leyen speaks during the opening ceremony of an EU summit at the Alfandega do Porto Congress Center in Porto, Portugal May 7, 2021. Luis Vieira/Pool via REUTERS

The European Commission called on Friday (7 May) on the United States and other major COVID-19 vaccine producers to export what they make as the European Union does, rather than talk about waiving intellectual property rights to the shots.

Commission head Ursula von der Leyen told a news conference on the sidelines of a summit of EU leaders that discussions on the waiver would not produce a single dose of COVID-19 vaccine in the short- to medium-term.

"We should be open to lead this discussion. But when we lead this discussion, there needs to be a 360 degree view on it because we need vaccines now for the whole world," she said.

"The European Union is the only continental or democratic region of this world that is exporting at large scale," von der Leyen said.

She said about 50% of European-produced coronavirus vaccine is exported to almost 90 countries, including those in the World Health Organization-backed COVAX program.

"And we invite all those who engage in the debate of a waiver for IP rights also to join us to commit to be willing to export a large share of what is being produced in that region," she said.

Only higher production, removing exports barriers and the sharing of already-ordered vaccines could immediately help fight the pandemic quickly, she said.

"So what is necessary in the short term and the medium term: First of all vaccine sharing. Secondly export of vaccines that are being produced. And the third is investment in the increasing of the capacity to manufacture vaccines."

Von der Leyen said the European Union had started its vaccine sharing mechanism, citing delivery of 615,000 doses to the Western Balkans as an example.

Continue Reading

Twitter

Facebook

Trending