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March 23, 2021

Europe needs extended pandemic emergency purchase programme to recover – leading macroeconomic influencers

Economists believe that the European Central Bank (ECB) needs to stretch its pandemic emergency purchase programme (PEPP) to stabilise financial markets.

Economists believe that the European Central Bank (ECB) needs to stretch its pandemic emergency purchase programme (PEPP) to completely overcome the Covid-19 crisis before switching to its monetary policy.

Andrea Garnero

Andrea Garnero, an economist at the Organisation for Economic Co-operation and Development (OECD), retweeted an article on how the PEPP, which was launched a year ago to support euro area citizens in sustaining their households and stabilise financial markets during the Covid-19 pandemic, is being extended through 2021. This was undertaken to keep the euro economy afloat amid the resurgence of Covid-19 infection cases, opines Christine Lagarde, the president of the ECB.

The ECB initiated PEPP with €750bn ($829.9bn) as a temporary measure to absorb the economic shock in response to the Covid-19 crisis when a major part of the economy and public life came to a standstill.

The bank purchased assets at a pace of more than €100bn ($110.6bn) per month under the asset purchase programme because private investors’ buying capacity deteriorated during the pandemic. The assets were distributed across the euro area to benefit all the sectors across countries from their monetary policy response, the article noted.

Additional, far-reaching measures were taken to ensure that banks carry out their monetary policy, improving corporate funding situation and capital markets.

The PEPP was expanded twice in 2020, to a total of €1,850bn ($2,047.5bn), which was more than 15% of the GDP of the euro area before the pandemic.

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Lagarde emphasises that the ECB has committed to continuing its assets purchase programme until March 2022, to keep financial conditions stable and support public sentiments during the crisis as vaccinations pick pace across the European countries.

Iglika Ivanova

Iglika Ivanova, an economist at the Canadian Centre for Policy Alternatives, retweeted an article on Amazon underplaying the numbers of Covid-19 infected workers at its warehouse in Brampton, Ontario in Canada.

The Amazon warehouse, employing approximately 5,000 workers was shut down last week when more than 600 workers were found to be infected with the novel coronavirus.

A local public health unit sent thousands of workers to isolation for two weeks, while the facility is being probed against the employers for potential violation of labour laws, and penalties amounting to approximately $1.5m or imprisonment if guilty.

The obligation to follow safety measures such as physical distancing forced workers to meeting the stringent production targets, while the conditions could get worse on their return from isolation.

Wojtek Kopczuk

Wojtek Kopczuk, an economist and professor at Columbia University, tweeted about an article suggesting that the European Union (EU) failed when compared to the US in terms of spending allocation for the Covid crisis.

However, Kopczuk pointed out that spending $10b as part of the Trump’s administration vaccine programme was hardly acting as if ‘money was no object’. As if that had been the case, then there should have been a return to full-scale production even before vaccines were approved .

European officials maintain that it is unfair to compare US’s $10bn towards vaccination programme as against EU’s $3.2bn, as neither of the two amounts explain how much money was actually spent on vaccines.

However, some experts believe that Europe lacked the wartime procurement powers that the US had used to secure raw materials for companies. This meant that the bloc was not first in line for vaccine doses.

The US and UK also seem to have a more liberal system for vaccine uptake, while European countries have tighter regulations.

 

 

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