ECB Gives Eurozone Another Shot in the arm to Fight Pandemic

Photo: Reuters

FRANKFURT (Reuters) - The European Central Bank (ECB) rolled out yet more stimulus measures on Thursday to lift the currency bloc out of a double-dip recession and provide support to the economy while its 350 million people wait for coronavirus vaccines to be deployed.

With many businesses shuttered, unemployment surging and debt hitting record highs, central bank cash has thrown governments and firms a lifeline this year but much of 2021 will pass before significant relief is likely.

Making good on its promise to keep supporting the economy during the pandemic, the ECB expanded its debt purchase scheme and agreed to provide banks with even more ultra-cheap liquidity as long as they keep passing the cash onto companies.

The ECB increased the overall size of its Pandemic Emergency Purchase Programme by 500 billion euros to 1.85 trillion euros, in line with market expectations. It also extended the scheme by 9 months to March 2022, with the aim of keeping government and corporate borrowing costs at record lows.

Reinvestments of cash maturing from the emergency bond purchase scheme were extended by one year until the end of 2023. The ECB also extended the period during which banks will get a 1% interest rate from the central bank for borrowing at its long-term cash auctions by one year to June 2022.

Aiming to give banks ample liquidity, the ECB will also hold three additional tenders for three-year loans with the last one now scheduled for December 2021, it added. In further help to banks, exceptionally easy collateral requirements that were introduced in the spring were also extended until June 2022.

The immediate future carries the prospect of a triple shock -- a lingering second wave of the pandemic, a hard Brexit and a delay in the European Union's 750 billion euro ($908 billion) recovery fund, due to be discussed at an E.U. summit on Thursday.

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