Eurogroup head offers more hints that monetary financing is coming


They already have a common stance

They already have a common stance

Comments from Donohoe:

  • Supportive economic policies should remain in place as long as needed
  • National budgets should be approach in a coordinated manner
  • We want a common approach on the budgetary stance by summer
  • As recovery phase is kicking in we will move to more targeted support measures for firms

The eurozone already has the Stability and Growth Pact. It says each country must implement a fiscal policy aiming for the country to stay within the
limits on government deficit (3% of GDP) and debt (60% of GDP); and in
case of having a debt level above 60% it should each year decline with a
satisfactory pace towards a level below.

I think this is a huge acknowledgement from Donohoe that’s obviously been building for some time. Deficit/debt discipline is going to be abandoned and the ECB will be engaging in monetary financing.

It will work until it doesn’t anymore.

For now though, there is some upshot in eurozone growth in 2021 and 2022 on more spending.

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By Jonathan Prop

Jonathan Prop is an independent financial advisor. He has been working in finance for the last 20 years. After retiring early in his 40s, Jonathan decided to help others get to grip with financial markets, particularly his area of expertise - forex!

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