The International Monetary Fund said on Monday the relaxation of the eurozone’s fiscal rules and support from the European Central Bank and the European Stability Mechanism are critical to a strong regional response to the coronavirus pandemic.
“The determination of euro area leaders to do what it takes to stabilize the euro should not be underestimated,” IMF European Department Director Poul Thomsen said in a blog post on the IMF website.
He said large-scale interventions by the ECB and European leaders’ call for the ESM to supplement national fiscal efforts can allow countries with high public debt to react forcefully to the crisis.
Europe’s major economies are losing 3 percent of GDP output for every month that key sectors are shut down to try to slow the spread of the virus, and “a deep European recession this year is a foregone conclusion,” Thomsen said. [Reuters]