ECB chief: Eurozone economy in for unprecedented contraction this year
The European Central Bank chief says the eurozone is grappling with unprecedented contraction in the aftermath of the new coronavirus’ outbreak that has bled economies dry throughout the European Union.
"The euro area economy is experiencing an unprecedented contraction," ECB President Christine Lagarde said on Thursday, adding, "There has been an abrupt drop in economic activity as a result of the coronavirus pandemic and the measures taken to contain it."
Economies, especially those of Italy and Spain, have taken a free fall brought about on one hand by the sweeping business blackouts that were imposed after the virus hit the bloc, and the additional spending that governments were forced to wheel out to treat patients and prevent more deaths on the other.
As a result, the bloc is wrestling with its worst recession since World War II, and its GDP is forecast to drop as low as %12.
Also on Thursday, the bank blew up a stimulus package it has introduced to help out the EU’s struggling constituents.
The bank stretched its emergency bond purchase scheme to mid-2021 and increased it by EUR 600 billion to EUR 1.35 trillion, Reuters reported.
The increase in the size of the package is expected to help the bank buy up the debts that governments are incurring during the crisis.
However, the bank is expected to roll out another increase in the package as the dire situation looks far from dissipation.
"We would expect a decision to increase the Pandemic Emergency Purchase Program envelope by 500 billion euros to 1.85 trillion euros to be made in September," Frederik Ducrozet, a strategist at Pictet Wealth Management said.
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