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ECB’s Lagarde calls for euro zone governments to use fiscal measures

By Amanda Cooper

Central bank chief says budgetary measures are very welcome

 Lagarde calls for euro zone governments to use fiscal measures

Euro zone governments should use budgetary measures to support economic growth, European Central Bank president Christine Lagarde told reporters.

"Fiscal measures intended to support the economy are certainly very welcomed, particularly under present circumstances," Lagarde told reporters in the German city of Wiesbaden, as reported by Reuters.

Lagarde, who took over at the helm of the ECB in November, has vowed to keep euro zone interest rates at rock-bottom levels in order to shore up the regional economy, which has suffered from shrinking manufacturing activity and a months-long slide in exports.

Inflation has remained stubbornly low and is showing no signs of the kind of pick-up that the ECB is looking for. Adding to the drag to the euro zone economy from the ongoing trade dispute between the US and China, two of the bloc’s biggest customers, has been the outbreak of the coronavirus, which threatens to slow global growth even further.

Euro zone interest rates are at record lows and the central bank is buying assets on the open market to keep borrowing conditions favourable, which leaves it with little extra room for manoeuvre if the economy takes a turn for the worst.

Lagarde has repeatedly called on governments in the single-currency bloc to use fiscal stimuli and increase spending to encourage growth. But she faces resistance from those that are set against increasing borrowing in order fund spending, starting with Germany.

In her remarks to reporters, she added that the level of trust in the euro, which has fallen by 3 per cent against the dollar so far this year, was of critical importance.

FURTHER READING: Low rates may hamper ECB says Christine Lagarde

FURTHER READING: ECB holds policy as it launches strategic review

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