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Exclusive: Christine Lagarde says countries must not 'brutally' pull stimulus

February 18, 2021. Summarized by summa-bot.

Compression ratio: 72.3%. 2 min read.

European Central Bank President Christine Lagarde addresses European lawmakers during a plenary session at the European Parliament in Brussels, Monday, Feb. 8, 2021. European Union legislators will assess with European Central Bank's policy chief Christine Lagarde the impact of the COVID-19 pandemic and what measures can be taken to ease the pain of the worst economic downturn in the history of the European Union. (AP Photo/Olivier Matthys, Pool)

Some politicians are worried that countries will borrow too much to prop up the economy over the coming year. Christine Lagarde doesn't share their concerns.

London (CNN Business)Some politicians are worried that countries will borrow too much to prop up the economy over the coming year.

The European Central Bank president told CNN Business' Richard Quest on Thursday that her biggest fear isn't that the European Union will accumulate a mountain of debt, but that governments could "brutally" withdraw job guarantees and income support before the time is right.

"That's the moment which I think is the most difficult, the most subtle, and where judgment will have to be applied," Lagarde said in the interview, which will air on CNN International's "Quest Means Business" show at 3:00 p. m. ET.

Governments unleashed trillions of dollars in relief spending over the past year to cushion the economic blow dealt by the Covid-19 pandemic, adding to unprecedented support from central banks like the ECB.

European leaders also approved a €1. 8 trillion ($2. 2 trillion) recovery package and budget to help strengthen the bloc's economies once the crisis passes.

But Lagarde emphasized that even as the economy starts to improve and the recovery takes hold, politicians should not withdraw support prematurely.

In its most recent forecast, released in December, the central bank predicted that Europe's economy will expand by 3. 9% in 2021, with output reaching pre-pandemic levels by the middle of 2022.

Lagarde noted that such forecasts hinge in large part on the vaccine rollout, which got off to a slow start in the European Union.

Late last month, a fight between EU leaders and AstraZeneca (AZN) spilled into public view after the vaccine maker said it would be delivering fewer doses than promised.

They're being manufactured, they're being distributed," Lagarde said.

The other key, said Lagarde, will be implementation of relief programs.

"We have this extraordinary move from the Europeans altogether deciding to borrow together," Lagarde said.

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