Construction cranes are illuminated by Christmas fairy lights, in the evening light on a construction site near the European Central Bank (ECB) building in Frankfurt, Germany Thursday Nov. 26, 2020. (Arne Dedert/dpa via AP)

Europe gets new blast of stimulus to counter virus surge

FRANKFURT — The European Central Bank unleashed another half-trillion euro ($600 billion) wave of stimulus as a winter surge in COVID-19 infections shuts down large parts of the economy and hurts pre-Christmas sales revenue ahead of the region’s most important holiday.

The 25-member governing council decided Thursday to increase its ongoing bond purchase stimulus by 500 billion euros, to 1.85 trillion from 1.35 trillion ($1.64 trillion). It will extend the duration of the support program until at least March 2022 instead of the current earliest end date of mid 2021. It also expanded its offerings of ultra-cheap loans to banks.

The bond purchases help keep credit affordable and available across the economy for consumers, businesses and governments. That is critically important to help businesses survive until the pandemic eases, and to support governments that are borrowing heavily to pay for aid to businesses and workers.

ECB President Christine Lagarde said that activity in services businesses was being “severely curbed” by the recent rise in COVID-19 cases, and that recent economic data “suggest a more pronounced near-term impact of the pandemic on the economy and a more protracted weakness in inflation than previously envisaged.”

The bank’s goal is to raise inflation, which was an annual minus 0.3% in November, toward its target of just below 2%, the level considered best for the economy.

The central bank is acting as new infections hover around record highs in Germany, the eurozone’s biggest economy, and as regional governments weigh new restrictions such as shutting schools or shops carrying non-essential goods.

In France, bars and restaurants, gyms, theatres, museums and cinemas remain closed. Outdoor Christmas markets have been shut across Europe, reducing foot traffic in usually bustling city centres, and many retailers will likely see only a fraction of their holiday business, while restaurant owners faced with forced closures must make do with takeout sales, or nothing. German Chancellor Angela Merkel on Wednesday urged citizens to cut down on social and other contacts, saying that “we are in a decisive, perhaps the decisive phase, of fighting the pandemic.”

The winter resurgence of the virus after an earlier peak in the spring means the eurozone economy will likely shrink in the last three months of the year after a strong rebound in the third quarter, when output jumped by 12.7%

Lagarde has said policymakers must keep support coming for businesses so that viable firms don’t go out of business before vaccines can help usher in a lasting recovery. Vaccinations are expected to begin in Europe early next year but it will take months to inoculate large numbers of people and limit the potential spread of the virus.

Support from governments has included cheap loans, furlough support that pays most of the salaries of workers put on short hours or sent home, tax breaks, and direct subsidies.

Governments have also marshalled support at the EU level by agreeing to borrow together to create a 750 billion-euro recovery fund. The fund is to pay for projects to expand the role of the internet and digital services in the economy, and to reduce emissions of carbon dioxide, the primary greenhouse gas blamed for climate change. The fund has been held up by conservative nationalist governments in Poland and Hungary, who object to making the money conditional on observance of EU concepts of rule of law. European leaders are holding a summit Thursday where they aim to resolve the dispute.

The U.S. Federal Reserve is also carrying out bond purchases but more attention has turned in recent days to government spending as Republicans and Democrats haggle over another round of stimulus relief in the Congress. Fed officials hold their next policy meeting Dec. 15-16. Several Fed officials have stressed the need for Congress to act and indicated that if lawmakers don’t provide more help they may alter their bond purchases to give the economy more assistance.

The ECB did not change interest rate benchmarks, which are already at record lows. The main refinancing rate at which it lends to banks is zero. The deposit rate on money banks leave overnight at the ECB is minus 0.5% rate, a penalty that pushes them to lend the money instead. On the other hand, banks that take long-term loans from the ECB can even get a negative rate themselves, meaning the ECB pays the banks to borrow so long as that money is in turn loaned out to businesses.

David McHugh, The Associated Press

Just Posted

Rotary Club of Red Deer logo.
Red Deer Rotary Club hosting tree planting event later this month

The Rotary Club of Red Deer will host a tree-planting event later… Continue reading

New admissions have been suspended for Engineering Technology diplomas (Instrumentation, Electrical and Mechanical) and the Transitional Vocational Program at Red Deer College. (Photo by Sean McIntosh/Advocate staff)
Developmentally disabled impacted: Red Deer College suspends program

Transitional Vocational Program comes to an end

Alberta’s chief medical officer of health Dr. Deena Hinshaw is asking Albertans to do their part by observing gathering limits, staying home if unwell, wearing masks and maintaining physical distance. (Photo by Chris Schwarz/Government of Alberta)
Three new Central zone COVID-19 deaths, Alberta adds 1,433 cases

Red Deer down to 802 active cases of COVID-19

NDP education critic Sarah Hoffman holds up freedom of information requests that turned up no records. The Opposition requested back-to-school re-entry plan correspondence between Education Minister Adriana LaGrange and school boards, teachers and the media. Photo via Facebook live
NDP renews calls for Alberta gov’t to scrap K-6 draft curriculum

The NDP is once again calling on the Alberta Government to get… Continue reading

Earlier this week Alberta Health Services warned that Rocky Mountain House Health Centre emergency department would be temporarily without physician coverage from May 12, at 6 p.m., to May 13, at 7 a.m. (Photo contributed by the Town of Rocky Mountain House)
Doctors needed in Rocky Mountain House

Emergency department temporarily closed due to doctor shortage

Bo’s Bar and Grill owner Brennen Wowk said the hospitality industry is looking for more clarity from the province around what conditions must be met to allow for restaurants reopening. (Advocate file photo)
Frustated restaurant owners want to know government’s reopening plan

Restaurant owners feel they are in lockdown limbo

Harley Hay
Harley Hay: Insert your name here

Back in the Paleolithic Era when a McDonald’s cheeseburger was 29 cents… Continue reading

Black Press file photo
Job search: Write a request that will get accepted

Last Thursday, when I logged into LinkedIn, I had nine connection requests… Continue reading

T-shirt with vaccine shot. (Contributed photo)
Letter: Hand out T-shirts with vaccine shots

I made myself a graphic T-shirt recently after getting my vaccine shot.… Continue reading

Winnipeg Jets' Kyle Connor (81) scores on Toronto Maple Leafs goaltender Jack Campbell (36) as TJ Brodie (78) defends during second-period NHL action in Winnipeg on Friday, May 14, 2021. THE CANADIAN PRESS/John Woods
Connor scores twice, Jets beat Leafs in regular-season finale

Connor scores twice, Jets beat Leafs in regular-season finale

Atletico Ottawa defender Vashon Neufville controls the ball during Atletico Ottawa’s first team practice of their inaugural season in the Canadian Premier League in Ottawa, Wednesday June 3, 2020. The Canadian Premier League plans to kick off its third season mid-June to early July in one location without fans. THE CANADIAN PRESS/Chris Wattie
Canadian Premier League delays kickoff again, looks to mid-June to early July start

Canadian Premier League delays kickoff again, looks to mid-June to early July start

Calgary’s Stephen Ames shoots 66 to take Mitsubishi Electric lead

Calgary’s Stephen Ames shoots 66 to take Mitsubishi Electric lead

Nashville Predators goaltender Juuse Saros (74) deflects a shot against the Carolina Hurricanes during the first period of an NHL hockey game Saturday, May 8, 2021, in Nashville, Tenn. (AP Photo/Mark Zaleski)
NHL postseason: Who’s hot as the playoffs arrive?

NHL postseason: Who’s hot as the playoffs arrive?

Ottawa Senators' Connor Brown, right, celebrates a goal with teammates during third period NHL action against the Montreal Canadiens, in Ottawa, Wednesday, March 5, 2021. Brown will lead a young Canadian squad into the world hockey championship in Riga, Latvia. THE CANADIAN PRESS/Sean Kilpatrick
Ottawa forward Connor Brown leads Canada’s roster at world championship

Ottawa forward Connor Brown leads Canada’s roster at world championship

Most Read