To sum up, a cross-check of the outcome of the economic analysis with the signals coming from the monetary analysis confirmed that an ample degree of monetary accommodation is necessary to support economic activity and the robust convergence of inflation to levels that are below, but close to, 2 per cent over the medium term.
Regarding fiscal policies, an ambitious and coordinated fiscal stance remains critical, in view of the sharp contraction in the euro area economy. To this end, continued support from national fiscal policies is warranted given weak demand from firms and households relating to the worsening of the pandemic and the intensification of containment measures. At the same time, fiscal measures taken in response to the pandemic emergency should, as much as possible, remain targeted and temporary in nature. The three safety nets endorsed by the European Council for workers, businesses and governments provide important funding support.
The Governing Council recognises the key role of the Next Generation EU package and stresses the importance of it becoming operational without delay. It calls on Member States to accelerate the ratification process, to finalise their recovery and resilience plans promptly and to deploy the funds for productive public spending, accompanied by productivity-enhancing structural policies. This would allow the Next Generation EU programme to contribute to a faster, stronger and more uniform recovery and would increase economic resilience and the growth potential of Member States' economies, thereby supporting the effectiveness of monetary policy in the euro area. Such structural policies are particularly important in addressing long-standing structural and institutional weaknesses and in accelerating the green and digital transitions.
DJG/apo
(END) Dow Jones Newswires
January 21, 2021 08:52 ET (13:52 GMT)
