According to the President of the ECB, overprinting would not pose a problem for price stability. This year, Europe has bought debt in response to the economic crisis that the COVID-19 pandemic has caused.
Christine Lagarde, President of the European Central Bank (ECB) recently stated that the financial institution would have no problem printing euros at will to cover losses. She highlighted that the US Federal Reserve (Fed) has already done it in recent times.
The representative of the entity claimed that the ECB could never go bankrupt or run out of money. Lagarde argued that that would not happen even in the event of losses on bonds or debt purchases to alleviate the economic crisis that the COVID-19 pandemic has caused.
Responding to an Italian member of the European Parliament, Lagarde said: “As the sole issuer of euro-denominated central bank money, the Eurosystem will always be able to generate additional liquidity as needed.”
The executive also stated that the financial institution would have no problem maintaining economic stability in the region. She added that no financial loss would affect their ability to seek and maintain price stability.
In October, Lagarde had already announced the possibility of executing a strategy to issue euros. It would be similar to the one that the US Fed had been applying in the United States. At the time, the policy would lead to exceeding the annual projected inflation rate above 2%.
The president of the ECB has taken this option into account, regardless of what the president of the Fed himself has said. Jerome Powell has acknowledged that the United States has been printing more money than it needs.
Europe Is Facing Debt and Recession Due to the COVID-19 Pandemic
In recent days, the president of the European currency-issuing entity referred to the current situation in the region, saying that it is a “very unusual recession.” Lagarde considers that this has been the result of the “deliberate closure of the economy as a consequence of the COVID-19 pandemic.”
In the face of the economic crisis, the ECB’s policy has been to buy more debt and to create a recovery fund. That fund would initially be EUR 750,000 million. However, the amount had an expansion of about EUR 1.35 billion.
In October, the ECB also talked about the possibility of creating a digital version of the euro. However, some people think that introducing a central bank digital currency (CBDC) would pose risks to users.
At the time, Lagarde said that “a digital euro will never be a substitute for cash. It is a very good supplement to it and a very good partial substitute for” what people were previously doing with physical money.
By Willmen Blanco
