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“We will not tolerate any tightening of financing conditions”, warns Christine Lagarde

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Christine Lagarde steps up. As the Covid-19 pandemic hits the European Union (EU), and eurozone leaders struggle to agree on the package of measures to be implemented to support the hardest hit countries, the President of the ECB defends, in a “World” forum and an interview with “Parisien” , the tools deployed by the European central banker.

Former IMF chief undergoes unprecedented baptism of fire disappointed the markets , a month ago, by not lowering rates and exempting the ECB from the role of “reducing spreads” [les écarts entre les taux d’emprunt des différents Etats européens, NDLR]. A small sentence that had frozen investors and could give a contrasting image at the same time that the Fed announced to inject 1.500 billion dollars in the money market.

“All put together, we have, on the one hand, a strike force of more than 1,000 billion euros to support financial credit, and therefore businesses and jobs. On the other side, we have 3,000 billion euros available, ”said Christine Lagarde on Thursday at“ Parisien ”.

Planned evolution of the toolbox

Recalling in particular the lines of financing offered to banks at -0.75% and the relaxation of guarantees, the President of the ECB affirms that these measures have “incited banking establishments to grant around 125 billion euros in loans more than if these facilities had not been put in place ”.

She adds, while access to credit is reveals less easy than expected for small structures and that business failures could see a jump of 15% in France: “We will not tolerate any procyclical tightening of financing conditions at the heart of one of the greatest macroeconomic cataclysms of modern times. “

The central banker’s toolbox could also be called upon to evolve, warns Christine Lagarde: “There is no limit to our commitment to serving the euro zone. The ECB will develop its tools and use them in the most appropriate way to fulfill its mission. “On Wednesday, the Governor of the Bank of France, François Villeroy de Galhau, did not rule out, in a forum in the” World “, the use of” the monetary helicopter “in the event of a” major risk ” from below ‘to price stability’.

“Amortize the new debt”

Christine Lagarde finally urges the leaders of the member countries of the euro zone to agree, while the discussions of the Eurogroup resume this Thursday. The previous phase of negotiations on Tuesday revealed the deep divisions between countries of the North and the South – led respectively by The Hague and Rome – around, in particular, the mutualisation of debt and the role of the European Stability Mechanism.

“I don’t think you have to fix on the ‘coronabonds’ […] A form of debt pooling already exists via the European Stability Mechanism, the European Investment Bank or the loans that the European Union can contract, ”recalls the President of the ECB.

New expressions of European solidarity could also emerge, such as “the pooling of expenditure within the framework of a specific European budget to end the crisis. Or the establishment of a reconstruction fund targeted at greener and more digital growth. ”

“Full alignment of fiscal and monetary policies, and equal treatment against the virus are the best way to protect our productive capacity and jobs, with a view to returning to sustainable growth and inflation rates once the pandemic will have ended, ”she said at last. A growth that would “over time, amortize the new debt”.

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