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European Central Bank clears way for more stimulus

October 29, 2020. Summarized by summa-bot.

The European Central Bank has signaled that it could provide even more stimulus this year, warning on Thursday of clear risks as the region's two biggest economies once again impose sweeping restrictions in an effort to curb the resurgent coronavirus.

London (CNN Business)The European Central Bank has signaled that it could provide even more stimulus this year, warning on Thursday of clear risks as the region's two biggest economies once again impose sweeping restrictions in an effort to curb the resurgent coronavirus.

The central bank is widely expected to add billions more to its $1. 35 trillion asset purchase program, which sits alongside the European Union's €800 billion ($938 billion) coronavirus recovery fund and has enabled even heavily indebted countries such as Italy to borrow money at zero interest.

The ECB "has clearly indicated its intention to provide more support in December," according to chief Europe economist at Capital Economics, Andrew Kenningham.

"The new restrictions announced in France and Germany, and likely to be replicated elsewhere, will probably tip the eurozone economy into another recession," he wrote in a research note on Thursday.

France and Germany on Wednesday announced wide-ranging restrictions to stem a second wave of coronavirus infections.

France will begin a four-week nationwide lockdown starting next Monday.

France's lockdown will last until December 1 "at minimum," President Emmanuel Macron said.

Business activity in Europe's manufacturing and services sectors was already in decline before stricter measures were announced, according to IHS Markit's latest Purchasing Managers' Index, raising expectations that key European economies will contract in the final quarter of 2020.

Economists at Allianz warned earlier this month of an "elevated risk of a double dip recession in countries that are once again resorting to targeted and regional lockdowns. "

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