Kovid's Package / European Central Bank Raises Emergency Relief Package to $ 1.5 Trillion, Previously $ 600 Billion

The bank said it would continue the bond-buying program that began before the epidemic

 

·      750-billion-euro long-term European Union recovery fund is still in the works

·      Germany has proposed an additional 130 billion euros for subsidy incentives to buy electric cars

 

Mumbai. The European Central Bank has increased the Epidemic Emergency Assistance Program from EUR 600 billion to 1.35 trillion euros ($ 1.5 trillion) in an effort to maintain affordable credit flows in the economy during a massive recession caused by the virus outbreak. This new relief program is different from what European governments spend.

 

Program extended from December 2020 to June 2021

The US Federal Reserve, the Bank of England, the Bank of Japan and other central banks around the world are trying to deal with a setback for both developing and wealthy economies. The central bank has also extended its monetary stimulus program to 19 countries using the euro from December 2020 to the end of June next year. ECB chair Christine Lagarde said after the meeting that she would assess the economy, which was organized by teleconference between 25 members of the bank's governing council due to the epidemic.

 

ECB buys corporate and government bonds from banks

In many ways, the ECB's moves reflect the Federal Reserve's concerns that have cut short-term interest rates to zero. It also initiated a $ 2 trillion purchase in securities and mortgage-backed bonds to keep the credit market functioning. Under the Epidemic Support Program, the ECB purchases corporate and government bonds and other financial assets from banks and pays it from Fresh Capital.

 

The ECB's purchase is not meant to support Italy

The large size of the purchase also sends a signal to the financial markets that the ECB is determined to reduce interest rates in the euro zone and to prevent faster borrowing costs for debtor governments like Italy. The ECB says its purchases are not meant to support Italy. Italy's lockdown will have an impact on tax revenues and additional spending economies. If an investor is skeptical about Italy's ability to pay, it will make it more difficult to borrow at higher rates.

 

ECB's support of 540 billion euros comes on top

The ECB's support of up to EUR 540 billion comes on top in financial support from Eurozone governments. This includes lines of credit from the Euro bailout fund. Also, a long-term EU recovery fund of 750 billion euros is still being worked on. Germany, the largest economy member, on Wednesday proposed an additional 130 billion euros to encourage subsidies and tax breaks to buy electric cars.

 

Economic output expected to fall by 7.75 percent

Significantly, the Executive Commission of the European Union has said that the economic output is expected to fall sharply by 7.75 percent this year. In such a situation, this support package will help and will help the economy to improve in the days ahead. The central bank kept its key interest rate benchmark unchanged on Thursday.

 

ECB lending rate to banks is zero

The rate at which the ECB lends to banks is zero. Its rate on deposits left overnight by commercial banks is now minus 0.5 percent. The aim is to push banks to lend additional cash. The ECB has also offered long term offers to banks at low rates for credit. But the condition is that they show that they are giving loans to companies. The bank said it would continue the bond-buying program that began before the epidemic. If monetary support continues, up to 20 billion euros per month will be spent for those purchases.