Eurozone crisis: EU single currency bloc heading for double-dip recession, warns ECB

EU at ‘crunch point’ over future of the Eurozone says expert

President Christine Lagarde dashed hopes of a speedy recovery amid optimism that the mass roll-out of Covid jabs can pave the way for an economic boost. “Risks surrounding the euro-area growth outlook remain tilted to the downside, but less pronounced,” she said. “The roll-out of vaccines, which started in late December, allows for greater confidence in the resolution of the health crisis.”

She added: “The start of the vaccination campaigns across the euro-area is an important milestone in the resolution of the ongoing health crisis.

“Nonetheless, the pandemic continues to pose serious risks to public health and to the euro-area and global economies.”

But Ms Largarde insisted the Eurozone economy probably shrank again at the end of last year, adding: “A decline in the fourth quarter will travel into the first quarter.”

Economists are increasingly predicting a slump in first three months of this year as governments extend their lockdowns to curb the spread of mutant coronavirus strains.

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European capitals have introduced a series of new measures as they ramp up protections against the health crisis.

The misery has been compiled by a bumpy start to the EU’s vaccine scheme, which has many of the EU’s largest economies lagging behind their international rivals in the roll-out of jabs.

Germany, the bloc’s largest, economy has announced this week it will tighten its lockdown and extend it until the middle of next month.

Chancellor Angela Merkel last night also pushed fellow EU leaders to introduce tougher common measures to counter the spread of the “British virus”.

Despite the gloom, Ms Lagarde hinted at a few “positives”, including the sign off for the EU’s €750 billion recovery fund, a revival in manufacturing and the limited progress on vaccines.

She also claimed the removal of political uncertainty in the US, with Joe Biden replacing Donald Trump as President, comes as a welcome boost.

Ms Lagarde said the ECB would continue with its stimulus schemes to stabilise the EU’s economy over the coming months.

“In this environment, ample monetary stimulus remains essential,” she said.

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And she vowed to continue adopting the ECB’s policies, saying: “We continue to stand ready to adjust all of our instruments, as appropriate, to ensure that inflation moves towards our aim in a sustained manner.”

According to the ECB’s latest forecasts, the central bank downgraded its growth outlook for 2021.

It expects the Eurozone to grow by just 3.9 percent this year, compared to its September forecast of five percent, and a 2.1 percent GDP rate for 2022.

A slump of 2.2 percent is forecast for the fourth quarter of last year.

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EU at ‘crunch point’ over future of the Eurozone says expert

Ms Lagarde, earlier this month, told an event: “I think our last projections in December are still very clearly plausible.”

Experts have adopted a more positive outlook, with hopes of an economic recovery boosted by the roll-out of Covid vaccines.

Joseph Little, global chief strategist at HSBC Global Asset Management, said: “As the vaccination programme gathers pace across the Eurozone, the economy should begin to recover from Spring.

“Despite the prospect of a re-invigorated recovery, the ECB is likely to remain dovish for a long time to come, as the economy is around seven percent smaller than a year ago.”

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