Europe is facing a difficult second quarter as coronavirus infections rise and governments reimpose lockdown measures, but the European Central Bank will do its part to keep borrowing costs ultra low, ECB chief economist Philip Lane said today.
Fearing that rising borrowing costs would derail the recovery, the ECB earlier this month promised to ramp up bond purchases to keep yields low.
Figures published yesterday showed its buys of mostly government bonds were already up by a half in the week since that decision.
"It's going to be a long quarter," Professor Philip Lane told CNBC in an interview, pointing to high and rising Covid-19 infection numbers.
"It's a contest between progress and vaccinations and other medical progress versus the near-term challenge of trying to get this virus under control," the former Central Bank chief said.
Vaccination campaigns have been painfully slow across the 19-country euro zone and governments are now extending, and in some cases tightening, lockdown measures well into April, pointing to a further delay in recovery.
Philip Lane played down last week's surge in bond buys under the Pandemic Emergency Purchase Programme as weekly data may be choppy.
He pledged that there would be a "substantial increase in a consistent way" over a longer period.
He added that governments, which play a vital role in financing the economy, needed to reflect on the adequacy of their response, particularly in light of the US government's $1.9 trillion stimulus package, which shifted the debate on the issue.
"It is an important issue for European policymakers to reflect upon how to calibrate the European fiscal response, and to make sure it's sufficient to get through this pandemic," Professor Lane told CNBC.
European officials are increasingly under fire for what is seen as an underwhelming fiscal response to the crisis, leaving Europe as a top laggard among advanced economies in the recovery.