The ECB warns of a hasty end to the economic aid measures
The European Central Bank (ECB) warns of a hasty end to the economic aid measures against the consequences of the pandemic in the five largest euro countries. This would significantly affect the economic performance of Germany, France, Italy, Spain and the Netherlands, according to an article in the new stability report of the monetary authorities.
“The simultaneous termination of the political measures could trigger a longer downward turn in the recovery path,” write the experts.
The ECB assumes that if the support steps are no longer implemented in the coming year, the gross domestic product (GDP) of the five largest euro countries will be reduced by an average of two percent. The GDP losses in the individual countries ranged between two and around four percent. The aid measures include, for example, short-time working programs, loan guarantees, tax breaks or the temporary suspension of the obligation to file for insolvency.
From the point of view of the experts, however, maintaining the support programs for too long is not without risks. Among other things, this could lead to companies that are actually not viable – also called “zombie companies” in the professional world – being kept afloat. The long-term growth prospects could be diminished as a result and this could also have a negative effect on financial stability. Therefore, according to the ECB, the dangers associated with prolonged aid measures should not be ignored either.
