What the ECB Actually Meant to Say on Thursday
Lagarde's package should provide meaningful relief to banks, companies and governments — but only if the coronavirus shock is indeed temporary.
Can we try that messaging again.
Photographer: Frank Rumpenhorst/dpa/picture alliance via Getty ImagesThe European Central Bank’s response to the coronavirus outbreak will be remembered for a terrible communications blunder. But if you look beyond President Christine Lagarde’s infamous seven words (“we are not here to close spreads”), the ECB package should provide meaningful relief to banks, companies and even governments, as they suffer a sharp and painful economic contraction.
The ECB measures will only work, however, if the economic shock from Covid-19 is indeed temporary, as the central bank assumes. At the moment, scientists offer no certainties that this will be the case. The ECB will have to remain extremely flexible to deal with more sustained damage — and to persuade the financial markets of its continuous support.