ECB warned today in a release that “even as infection rates fall in many countries, the impact on the economy and markets has unearthed and increased existing vulnerabilities for euro area financial stability.”
“The pandemic has caused one of the sharpest economic contractions in recent history, but wide-ranging policy measures have averted a financial meltdown”, ECB Vice-President Luis de Guindos said. “However, the repercussions of the pandemic on bank profitability prospects and medium-term public finances will need to be addressed so that our financial system can continue to support the economic recovery”, he added.
Separately, Chief Economist Philip Lane said “even a lot of recovery in recent months would still leave the euro area economy in an expected range.” “The euro area economy is probably growing a little bit” only. Also, the “whole point” of the flexibility of the Pandemic Emergency Purchase Programme is that “you can deviate from the capital key”.