Economy, Europe

ECB head promotes structural, fiscal policies in growth

In view of weakened economic outlook, ECB welcomes Eurogroup’s call for differentiated fiscal responses, Lagarde says

Aysu Biçer   | 12.12.2019
ECB head promotes structural, fiscal policies in growth


The new president of the European Central Bank (ECB) chaired her first meeting Thursday and encouraged governments with fiscal space to be ready to act in effective and timely manner. 

"In order to reap the full benefits from our monetary policy measures, other policy areas must contribute more decisively to raising the longer-term growth potential, supporting aggregate demand at the current juncture and reducing vulnerabilities," Christine Lagarde said at a news conference.

She noted implementation of structural policies in euro area countries needs to be substantially stepped up to boost euro area productivity and growth potential, reduce structural unemployment and increase resilience.

"The 2019 country-specific recommendations should serve as the relevant signpost," she added.  

ECB welcomes differentiated fiscal responses

Her remarks regarding fiscal policies could be considered encouraging as she said the euro area fiscal stance is expected to remain mildly expansionary in 2020, thus providing support to economic activity.

"In view of the weakened economic outlook, the Governing Council welcomes the Eurogroup’s call for differentiated fiscal responses and its readiness to coordinate."

She said governments with fiscal space should be ready to act in an effective and timely manner, adding all countries should intensify their efforts to achieve a more growth-friendly composition of public finances.

"In countries where public debt is high, governments need to pursue prudent policies and meet structural balance targets, which will create the conditions for automatic stabilizers to operate freely," she noted.

Lagarde's new position is considered important for the changing missions of central banks across the globe, especially after the 2008 global financial crisis, focusing on strategic communication and coordination with all other economic institutions rather than implementing strict monetary policies. 

Bank holds key interest rates stable

The bank decided to keep interest rates stable, reiterating its stance on holding historically low rates until eurozone inflation reaches a 2% target.

Interest rates on the marginal lending facility and the deposit facility remained unchanged at 0.00%, 0.25% and -0.50%, respectively.

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