The future of the Eurozone is dark

By: Miguel A. Rodriguez

09:45, 14 September 2020

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ECB revises the GDP decrease for this year.

Earlier today, in a Q&A meeting, Christine Lagarde, the President of the European Central Bank, spoke about the future of the Eurozone economy, as it was hit significantly by the pandemic. 

She revised the GDP scenarios for this year. According to her, the Eurozone experienced the mild scenario, which represented an economic contraction of 5%, and entered a medium to severe one in which the decrease varies between 8% to 12%. For the first quarter of 2020, the GDP shrank 3.8%, which is worse than what happened during the 2008-2009 financial crisis. 

For the second quarter of this year, a collapse of 15% in output has been speculated, as France and Italy are close to recession, and Germany has already entered it last week. 

Today’s statements reinforced yesterday’s interview of ECB’s Vice President, Luis de Guindos. He reiterated the Bank’s flexibility on adjusting the asset-buying programs, as far as timing of purchases and types of assets is concerned, as Lagarde herself said before  "as much as necessary and for as long as needed." After his statement, the EUR/USD gained 0.75%.

Specialists believe that another stimulus is in sight, which probably will be a subject to consider at the next ECB meeting in June.

Still, there is a silver lining. There’s a growth prediction for the Eurozone of 6.3% in 2021. But specialists consider it not to be enough to compensate for this year's shrinkage.  

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Sources: forexlive.com, businessinsider.com, theguardian.com.


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