>> GROUP: Shadow ECB Council / EZB-Schattenrat  Dr. Elga Bartsch

Dr. Elga Bartsch: In my view, it is clear that the ECB, like its global counterparts, mainly has supportive role in aiding the recovery. The lead role is really with fiscal policy on this occasion. This is because only fiscal measures can provide the bridge for the disruptions in incomes and cash-flows that are needed during the disruptions caused by social distancing by directly providing funds to the private sector.

The role of the central bank is primarily to ensure smooth market functioning, prevent an unwarranted tightening in financial conditions and acting as a lender of last resort.To this end, the ECB needs to ensure that its monetary policy stance is full transmitted into all segments of the euro area economy. This will likely require a material increase in the PEPP. In Europe where banks play a much more important role in financing the economy, support for bank lending is more important than in the US (where the Federal Reserve rightly focuses more on credit markets). The decision of the ECB to introduce dual rates on its TLTROs is still not fully appreciated by markets, in my view.
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