ECB to Raise Interest Rates if Necessary

ECB to Raise Interest Rates if Necessary

Jens Weidmann, Bundesbank President, cautioned eurozone governments to increase public debt to support their economies during the pandemic. Moreover, he warned not to expect the European Central Bank to keep interest rates low forever.

If price stability mandates higher interest rates, they will not take into consideration sovereign debt servicing costs. This was a statement from Weidmann, a member of the ECB’s Governing Council on Thursday.

In their own interest, he said, governments should prepare for a rise in interest rates. They should not pretend that their debt burden can be serviced easily, Weidmann added.

European Union nations are reeling under the weight of a coronavirus-induced recession. These EU nations agreed earlier this year on an unprecedented 750 billion euro recovery package. That’s funded by a joint debt issuance, a once-taboo subject long criticised by Germany. 

Furthermore, member states have also taken on separate new debt to support their economies during the crisis.

The European Central Bank approved a fresh stimulus package this month It said 2021 would remain difficult. It predicted that by the end of the year, vaccinations could lead to sufficient levels of herd immunity

UK Parliament Approves Brexit Trade Deal with EU 

Meanwhile, in other news, British lawmakers approved Prime Minister Boris Johnson’s post-Brexit trade deal with the European Union on Wednesday. 

On Wednesday, Britain and the EU signed the deal which ended over four years of negotiation. It also safeguarded nearly a $1 trillion of annual trade. The British parliament will finalise its implementation.

In favour of the deal, the Parliament’s lower house voted 521 to 73. Queen Elizabeth gave final approval to the legislation. It enabled the government to implement and ratify the UK’s trade deal with the European Union.

The Royal Assent was effectively a rubber-stamp for the law which passed through parliament.

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