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ECB puts on brave face as new virus variant spreads

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Economy1 hour ago (Nov 29, 2021 09:36)

© Reuters. FILE PHOTO: Bank of France Governor Francois Villeroy de Galhau at the Bank of France in Paris, France, October 22, 2021. REUTERS/Sarah Meyssonnier/File Photo

PARIS (Reuters) -European Central Bank policymakers sought to reassure investors rattled by a new variant of the coronavirus on Monday, arguing that the euro zone’s economy had learned to cope with successive waves of the pandemic.

Carrying a “very high” global risk of surges according to the World Health Organisation, the Omicron variant is threatening a brisk economic revival and could jeopardise plans by the ECB and other global central banks to dial back emergency support after nearly two years.

But ECB President Christine Lagarde, her deputy Luis de Guindos and French governor Francois Villeroy de Galhau put on a brave face against this new risk.

“There is an obvious concern about the economic recovery in 2022, but I believe we have learnt a lot,” Lagarde told Italian broadcaster RAI late on Sunday. “We now know our enemy and what measures to take. We are all better equipped to respond to a risk of a fifth wave or the Omicron variant.”

She was echoed by her fellow countryman and ECB policymaker Francois Villeroy de Galhau.

‘LESS AND LESS DAMAGING’

“Obviously, we must monitor closely the latest COVID developments, and the new Omicron strain,” Villeroy told an online financial conference.

“But the economic effects of the successive waves have proven so far to be less and less damaging, and this one shouldn’t presumably change the economic outlook too much.”

Markets regained some composure on Monday as investors awaited further details of the variant, which has already brought back some travel curbs. [MKTS/GLOB]

ECB vice-president Luis de Guindos acknowledged the “high degree of uncertainty” but argued much higher vaccination rates should help Europe better deal with these risks.

He added it was important that monetary policy kept all options open.

On Friday, he had said the ECB was still on course to end its 1.85 trillion euros Pandemic Emergency Purchase Programme (PEPP) in March, as planned.

With the PEPP decision seen as a done deal before the advent of the new coronavirus variant, euro zone rate setters had mainly been discussing whether to increase bond purchases via other channels, such as the ECB’s regular Asset Purchase Programme.

ECB puts on brave face as new virus variant spreads

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