Central Bank chief hits back at Covid-19 political criticism with call for action by EU governments

The Central Bank has hit back at political criticism over its role in fighting the economic fallout from the Covid-19 pandemic by saying the measures it and the ECB have taken will keep sovereign interest rates under control and help encourage Irish banks to lend during the crisis.
Central Bank chief hits back at Covid-19 political criticism with call for action by EU governments

The Central Bank has hit back at political criticism over its role in fighting the economic fallout from the Covid-19 pandemic by saying the measures it and the ECB have taken will keep sovereign interest rates under control and help encourage Irish banks to lend during the crisis.

Governor Gabriel Gabriel Makhlouf said the ECB’’s €1 trillion prgramme of bond buying this year will help insulate the eurozone from the pandemic crisis growing into a sovereign debt crisis -- as happened during the financial crisis of a decade ago.

He said the Irish economy will be able to borrow the funds to cover the economic costs of fighting the pandemic and repeated the call by the ECB for European governments to take "coordinated" and "forceful" action.

Mr Makhlouf said he was "agnostic" about whether the EU governments and institutions achieve their goals by using  measures such as the so-called corona bonds or through using the eurozone’’s bailout vehicle, as long as any programme was well designed.

The Central Bank said Irish banks can tap the ECB’’s special liquidity programme and he reiterated that the easing in recent weeks of the Central Bank’’s own reserve requirements would help support lending.

“The Central Bank, working with our colleagues across Europe and Ireland, is playing its part to reduce the economic impact to businesses and households. In addition to the monetary policy decisions taken by the ECB Governing Council, our immediate response has included measures that minimise the impact of the crisis including the release of capital buffers to support the ongoing provision of credit to the economy and practical measures to help households with mortgage repayments," Mr Makhlouf said.

"If used entirely to fund new lending, the capacity for new lending could range from between €10bn and €16bn based on plausible estimates for risk-weight densities," he said.

"The Central Bank, working with our colleagues across Europe and Ireland, is playing its part to reduce the economic impact to businesses and households," he said.

The remarks come as EU finance ministers met by teleconference to discuss measures on how governments will bear the huge costs that fighting the Covid-19 pandemic entail.

Meanwhile, business group Ibec said it anticipated that the Government will announce a range of measures in the coming weeks to adjust and add to the liquidity and income-support measures it has announced to support the economy.

Ibec director of policy Fergal O’’Brien said he expected a series of announcements rather than a "big bang" package of announcements.

He said that there was room to improve the wage-subsidy scheme to help people to take up exceptional rate of  vacancies in some sectors such as retail during the crisis.

On potential liquidity measures for businesses, Mr O’’Brien said that new measures could include loan guarantees and export insurance, including low or zero-interest loans.

He said that it was essential for the State to help direct lending to companies, adding that zero-interest rates loans guaranteed by the State over the crisis could be "a game changer".

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