Eurozone crisis: EU alarm bells as ‘hardest still to come’ for teetering currency

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The European Central Bank President said eurozone leaders had not yet witnessed the “hardest” impacts from shutting down their economies to curb the spread of the deadly disease. Speaking at a United Nations event, she said: “The worst is behind us and the hardest is yet to come.” Ms Lagarde added the recovery is going to be “as uncertain and as uneven as the shock was decisive across the board”.

Europe faces its deepest recession since the end of the Second World War, according to the ECB’s forecasts.

The Frankfurt-based central bank has already boosted its stimulus three times this year, offering unprecedented levels of support for an economy that could shrink by close to a tenth in 2020 and take another two years to reach pre-crisis levels.

The ECB extended its emergency bond purchases until June 2021, and could possibly could expand the programme again in the future.

Its chief economist Philip Lane said: “We’ve done a lot. We have essentially this one-year horizon.

“That one-year horizon reflects that, before we really know how able the European economy will be to recover from this shock.”

He added that the ECB’s intervention, including €1 trillion euros worth of loans to banks, had somewhat stabilised the markets.

Meanwhile German Chancellor Angela Merkel has placed added empthasis on the need for the EU’s economic survival.

She has previously warned the entire bloc could collapse without financial stability.

The veteran leader, who yesterday took over the EU’s rotating presidency, has thrown her diplomatic weight behind plans for a €750 billion bailout fund.

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The recovery fund, which will create a joint EU debt in order to distribute €500 billion in grants and €250 billion in loans to pandemic-stricken regions and industries, is highly controversial amongst member states.

Mrs Merkel said: “The recovery fund cannot solve all of Europe’s problems. But not having it would make all our problems worse.

“Europe’s economic health can influence so many things. Very high unemployment in a country can become politically explosive and thereby increase the threat to democracy.

“For Europe to survive, its economy needs to survive.”

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EU leaders will hold their first face-to-face summit, since the pandemic exploded onto the Continent, in Brussels later this month.

European Council President Charles Michel yesterday met with senior diplomats from the EU27 to discuss his plans for the showdown.

He tabled a so-called “negotiating box” that he hopes leaders will be able to work from in order to broker a compromise.

But critics have claimed his blueprints lack proper solutions, saying the chief eurocrat is waiting for Mrs Merkel to come to the rescue.

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