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Eurozone Likely To Contract 8-12% In 2020, ECB Chief Says

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European Central Bank President Christine Lagarde said the euro area economy is likely to contract as much as 12 percent in 2020 as member countries struggle to emerge from the coronavirus pandemic.

On a live webinar, Lagarde said on Wednesday, the actual economic outcome would come between the ECB's "medium" and "severe" scenarios. The mild scenario is outdated.

The governing council of the ECB meets next on June 4. The bank will update its outlook for both growth and inflation next week.

The currency bloc had contracted 3.8 percent in the first quarter, which was the biggest contraction since the series began in 1995.

In March, the ECB had launched a new EUR 750 billion Pandemic Emergency Purchase Programme to combat the risks posed by coronavirus, or Covid-19.

ECB Executive Board member Isabel Schnabel, said the bank is ready to expand its monetary policy tools after taking into account the updated forecast for inflation and growth next week.

In an interview with Financial Times, published on the ECB website, Schnabel said "If we see that the situation has deteriorated, and if we judge that further stimulus is needed, the ECB will be ready to expand any of its tools in order to achieve its price stability objective."

With respect to the EUR 750 billion Pandemic Emergency Purchase Programme, Schnabel said this concerns the size but also the composition and the duration of the programme. "We are ready to react to new data coming in."

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