ECB unleashes $600 billion in new stimulus to prop up Europe's economy
Posted December 10, 2020 8:02 a.m. EST
CNN — The European Central Bank is expanding its huge money-printing program by hundreds of billions of euros, an attempt to prop up the economy as another wave of coronavirus rips through the region and threatens to derail its fragile recovery.
The central bank said in a statement on Thursday that it would increase its asset purchases by €500 billion ($605 billion), bringing the total stimulus program to €1.85 trillion ($2.24 trillion). It also plans to extend purchases to at least the end of March 2022 and grant more subsidized loans to banks to stimulate lending.
"The monetary policy measures taken today will contribute to preserving favourable financing conditions over the pandemic period, thereby supporting the flow of credit to all sectors of the economy, underpinning economic activity and safeguarding medium-term price stability," the statement said.
The ECB said that "uncertainty remains high" with regards to the development of the pandemic and the timing of vaccine distribution, and it therefore stands ready to adjust its tools to ensure inflation moves towards its 2% target.
This is the second time that the ECB has expanded its Pandemic Emergency Purchase Program (PEPP), which it rolled out in the spring as the coronavirus swept across Europe and governments imposed tight restrictions on economic activity. In June, it increased the size of the program by €600 billion ($726 billion).
Despite a record rebound in the third quarter, the EU economy remained 4.2% smaller than its September 2019 level, according to statistics agency Eurostat. Europe is now battling another surge in coronavirus cases, prompting fresh lockdowns in major economies such as Germany, France and Italy. And GDP is expected to contract again in the fourth quarter.
The International Monetary Fund expects Europe's economy to shrink by 7% in 2020, a sharper decline than the United States, but less severe than the United Kingdom.
— This is a developing story and will be updated.