Christine Lagarde, president of the European Central Bank (ECB), said on Monday that the journey to recovery in 2021 would most likely be accompanied by a very high level of uncertainty before a transition to a new economy.
Joining an online panel discussion during the World Economic Forum's (WEF) virtual Davos Agenda meeting, the ECB president said that data from the fourth quarter of 2020 indicated that the journey to recovery in the Euro-zone has been delayed as a series of lockdown measures and restrictions have had to be rolled out despite positive progress in vaccinations.
However, this journey to recovery has not been derailed, Lagarde said, emphasizing that fiscal policy still has to play a dominant role and remain active, while the ECB will continue to support all the economic sectors in the Euro-zone by ensuring favorable financing conditions.
She said that the transition to a new economy entailed digitalization and green development, among others.
Lagarde also warned about the challenges brought about by the COVID-19 pandemic, which include the higher underlying unemployment, the widening gap between low-skilled and high-skilled workers, the lasting scars left by the pandemic on the productive and non-productive sectors, and the decreasing research and development (R&D) expenditures by enterprises.
On both the fiscal front and the monetary policy front, the authorities will have to stay the course and continue to support, Lagarde said, adding that investment should be focused to lay the ground for the new economy.
More than 2,000 business, government and civil society leaders and 25 heads of state or government meet virtually for the WEF Davos Agenda this week to tackle the fallout from the COVID-19 pandemic and address the urgent need for global cooperation.