Christine Lagarde Can't Solve the Covid-19 Crisis
The ECB can't force banks to lend, nor governments to spend. Managing the Covid-19 crisis goes way beyond the powers of the central bank.
There's only so much the ECB can do.
Photo: Bloomberg
Christine Lagarde spooked markets seven weeks ago by saying that the European Central Bank wasn’t there to close the spread in yields between government bonds of euro area countries. On Thursday, the ECB president did everything she could to convince markets of the opposite.
In a tense press conference, Lagarde chose to read from a script to avoid any communication mishaps. The message was simple: Whatever happens during the Covid-19 epidemic, the central bank will adjust its financial instruments to make sure that governments can keep funding themselves at reasonable rates and banks can keep pumping credit into the real economy. The debt market took heart and most government bonds rallied on the day.