Stimulus will add to high debt levels but alternative is ‘much worse,’ ECB vice president says

CNBC reports that the vice president of the European Central Bank (ECB) has backed the unprecedented stimulus packages launched in the region, saying there were no alternatives for lawmakers.

Governments from euro area countries have passed major stimulus efforts in a bid to soften the impact of the coronavirus crisis and keep people in work. Fiscal deficits are expected to widen, debt piles will climb and the financial repercussions could be felt for generations.

However, Luis de Guindos, the vice president of the euro zone’s central bank, said the issue of lofty debt levels needs to be put into perceptive.

“At the end of the pandemic for sure that we will have higher public debt ratio. But the alternative of doing nothing is much worse,” he told CNBC’s Annette Weisbach when asked specifically about Italy.

“It would be much worse in terms of the crisis. And it would be much worse in terms of the recovery phase,” he added. 

The ECB vice chief said that concerns over public finances in the medium term will have to be addressed. But for now, he called for “powerful and strong” fiscal responses at both the national and pan-European level.