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

Get local stories you won't find anywhere else right to your inbox.
Sign up here

Just Posted

Alberta has 3,651 active cases of COVID-19.  (File photo)
Gov’t reports two more COVID-19 deaths in Red Deer on Sunday

Nineteen new deaths, including two in Red Deer, were reported by the… Continue reading

Andre Lemus, the owner of Las Palmeras in Red Deer, says he hopes in-person dining restrictions are lifted this upcoming Thursday. (Photo courtesy www.laspalmeras.ca)
Red Deer restaurant owner hopes in-person dining restrictions are lifted Thursday

The owner of a Red Deer restaurant says business has “dropped” since… Continue reading

The Town of Ponoka and the Alberta Union of Provincial Employees (AUPE) have ratified a new agreement, averting a strike. (File photo from Facebook)
Alberta gov’t ‘using pandemic as shield to lay off workers,’ says AUPE

The Government of Alberta’s “attacks on workers” is continuing with a new… Continue reading

Rocky Mountain House RCMP, EMS, Search and Rescue, STARS air ambulance and Alstrom Helicopters worked together to rescue a fallen ice climber Friday. (Photo contributed by Rocky Mountain House RCMP)
Rocky Mountain House RCMP help rescue fallen ice climber

Rocky Mountain RCMP helped assist a fallen ice climber Friday afternoon. At… Continue reading

Dwayne Buckle, 40 of Red Deer finished a 1,638-kilometre walk, in honour of his family. The 12-week, 82 day-journey wrapped up in Port Hardy, B.C. on Monday. Facebook photo
Red Deer man completes 1,638 km hike for cancer research

Dwayne Buckle, a Red Deer firefighter returned home Friday after his 12-week journey

A cat named Willow is shown in this recent handout photo. Victoria firefighter Capt. Tim Hanley says using a jackhammer and other home repair tools to save a cat stuck in a tiny basement drainpipe ranks as the strangest rescue call he's been on in his 20-year career. Hanley says he and three other firefighters spent more than two hours using sledgehammers and a jackhammer to break through Victoria homeowner Emma Hutchinson's concrete basement floor to free Willow, a nine-month-old kitten. THE CANADIAN PRESS/HO - Twitter, City of Victoria
Victoria firefighters use homeowners’ jackhammer to rescue cat trapped in tiny pipe

VICTORIA — A Victoria firefighter says using a jackhammer and other home… Continue reading

Conservative Leader Erin O'Toole holds a press conference on Parliament Hill, in Ottawa on December 10, 2020. THE CANADIAN PRESS/Sean Kilpatrick
No place for ‘far right’ in Conservative Party: O’Toole

OTTAWA — Federal Conservative Leader Erin O’Toole says there is “no place… Continue reading

Alberta Energy Minister Sonya Savage addresses the attendees while Tom Olsen, Managing Director of the Canadian Energy Centre, looks on at a press conference at SAIT in Calgary on Wednesday, Dec. 11, 2019. THE CANADIAN PRESS/Greg Fulmes
‘Morally and ethically wrong:’ Court to hear challenge to Alberta coal policy removal

First Nations, ranchers, municipal officials and environmentalists hope to persuade a judge… Continue reading

Sub-Lt. Jeffrey Delisle arrives at Nova Scotia provincial court for a sentencing hearing in Halifax on Friday, Feb. 1, 2013. THE CANADIAN PRESS/Andrew Vaughan
Canada’s spy-catching system caused delay, angst in Delisle case: former FBI official

OTTAWA — The U.S. Federal Bureau of Investigation’s former head of counter-intelligence… Continue reading

People wait to be screened before entering Little Mountain Place, a long-term care home that has had 41 residents die since a COVID-19 outbreak was declared at the facility in November in Vancouver on Sunday, January 3, 2021. Staff in long-term care homes across Canada are struggling to isolate elderly residents with dementia during COVID-19 outbreaks, accelerating the deadly spread of the virus, experts say. THE CANADIAN PRESS/Darryl Dyck
Care home staff struggle to isolate dementia patients during outbreaks: experts

VANCOUVER — Staff in long-term care homes across Canada are struggling to… Continue reading

A passer by walks in High Park, in Toronto, Thursday, Jan. 14, 2021. This workweek will kick off with what's fabled to be the most depressing day of the year, during one of the darkest eras in recent history. THE CANADIAN PRESS/Chris Young
‘Blue Monday’ getting you down? Exercise may be the cure, say experts

This workweek will kick off with what’s fabled to be the most… Continue reading

Winnipeg Jets' Blake Wheeler (26) just misses the net against goaltender Laurent Brossoit (30) during  scrimmage at their NHL training camp practice in Winnipeg, Wednesday, January 6, 2021. THE CANADIAN PRESS/John Woods
Jets return to practice a day after suspending workouts due to COVID concerns

WINNIPEG — The Winnipeg Jets have returned to practice a day after… Continue reading

Most Read