LONDON The US $ 1.9 trillion coronavirus relief program is an “important engine for the world economy” and will have positive spillover effects in the eurozone, chief economist of the European Central Bank.
Earlier this month, President Joe Biden signed a massive fiscal stimulus package that will send direct payments of up to $ 1,400 to most Americans. The program, which is already underway, is expected to support the global economy. In fact, the Organization for Economic Co-operation and Development estimated this month that the relief bill will add about 1 percentage point to global growth this year.
And the euro zone hopes to benefit from it as well.
“There will be a positive fallout from the United States, the fact that there is a significant stimulus in the United States will boost global GDP, boost euro area exports,” the chief economist said on Monday. from ECB Philip Lane to Annette Weisbach from CNBC.
Much of the euro area’s economic output is driven by exports, which have been hit hard by the pandemic. Data released in January shows that euro area exports fell 11.4% over a 12-month period.
“Of course, the initial impact was more visible in the financial market, but over time as this stimulus unfolds it will be an important driver for the global economy,” Lane added.
European officials are often criticized for not granting similar fiscal power to the United States. The 27 European countries, for example, agreed in July to implement a joint 750 billion euro ($ 895 billion) stimulus, but those funds have yet to be distributed.
“Given the nature of the United States, you can have very large tax packages incorporated into one piece of legislation. As you know in the European situation, we have a mix, we have 19 tax policies and then we have l ‘joint tax action,’ he added. Lane said.
Lane referred to a recent meeting between eurozone finance ministers, at which there were pledges for an “agile fiscal response” without an early exit.
At the same meeting, European officials also said that it is likely that tighter budget targets will remain on hold in 2022, so member states will continue to have the capacity to meet the economic challenges of the pandemic of coronavirus.
The parameters of the budget debate have clearly changed with the American decision. And this is an important question on which European policy makers must reflect.
Chief Economist of the ECB
The euro zone was hit hard by the health emergency, after contracting by nearly 7% in 2020. If the ECB has forecast a growth rate of 4% for the euro zone this year, this is accompanied by ‘a significant level of uncertainty.
Economic performance will depend on the evolution of the pandemic, including new variants; as well as the roll-out of vaccination, which has been difficult for the EU so far. In addition, some EU countries are currently facing the start of a third wave of infections and have therefore imposed more stringent restrictions on travel.
In this context, whether at national or European level, Lane suggested that member states could soon discuss how to provide more aid to their populations.
“The parameters of the budget debate have clearly evolved with the US decision. And this is an important question on which European policymakers must reflect on how to calibrate the European budget response and ensure that it is sufficient to get through. this pandemic, ”said Lane mentioned.
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