ECB’s Lane Faces Unusual Rejection of Latest Stimulus Package

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ECB's Lane Faces Unusual Rejection of Latest Stimulus Package




Archive image of a journalist taking a photo of a 50 euro note at the headquarters of the European Central Bank (ECB) in Frankfurt


© Reuters/KAI PFAFFENBACH
Archive image of a journalist taking a photo of a 50 euro note at the headquarters of the European Central Bank (ECB) in Frankfurt


FRANKFURT, Jan 14 (Reuters) – European Central Bank chief economist Philip Lane faced pushback from colleagues when he proposed new measures aimed at helping the euro zone overcome the coronavirus pandemic during the latest ECB meeting, it showed. on Thursday the official report of the meeting.

In the face of a new recession amid widespread lockdowns, the ECB approved new purchases of bonds and subsidized loans from banks at its December 10 meeting, hoping to keep credit costs low until the bloc is ready to reopen. .

But Lane’s plan to allow banks to borrow more from negative ECB rates met resistance and was scaled back, a rare occurrence that shows growing skepticism at the central bank’s leadership about some aspects of his ultra-expansive policy.

“Various reservations were expressed regarding the proposed increase in the 60% loan reserve, related in particular to concerns that it would make banks increasingly dependent on the Eurosystem,” the ECB said in its meeting report. .

“In this context, a broad agreement was reached to increase the loan reserve to 55% of the stock of eligible loans.”

While the ECB authorities often disagree on policies, their differences are usually resolved before the meeting, so the proposal from the chief economist is rarely changed.

PURCHASES OF EMERGENCY BONDS

Rate-setters also disagreed over the amount of additional emergency bond purchases last month. Some advocated for a smaller figure and others for one greater than the 500 billion euros proposed by Lane.

Discussions before the December meeting began with a proposal for additional purchases of bonds worth 750 billion euros, before reaching a 500 billion euros deal on December 10, sources told Reuters at the time.

The restrictions imposed by the bloc governments on daily life have become increasingly burdensome since then, affecting growth projections and increasing the risk that the recovery will be further delayed.

ECB President Christine Lagarde argued this week that uncertainty is actually diminishing and that even if the pandemic presents short-term challenges, the overall picture has not changed.

The ECB authorities will meet again on January 21 and are expected to ratify the bank’s ultra-expansive policy, which includes purchases of bonds worth 1.85 trillion euros as part of the Pandemic Emergency Purchase Program until March 2022 .

(Reporting by Balazs Koranyi and Francesco Canepa; Edited in Spanish by Ricardo Figueroa)

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