ECB's Lagarde sees 'unsteady' recovery despite vaccine hope

FRANKFURT AM MAIN: European Central Bank president Christine Lagarde on Wednesday warned of an "unsteady" eurozone recovery from the pandemic despite "encouraging" news about a vaccine.

"Until widespread immunity is achieved," Lagarde told a virtual forum on central banking, "we could still face recurring cycles of accelerating viral spread and tightening restrictions."

"The recovery may not be linear, but rather unsteady, stop-start and contingent on the pace of vaccine roll-out."

US giant Pfizer and Germany's BioNTech on Monday said their Covid-19 vaccine had shown 90 percent effectiveness in phase three trials, boosting hopes of a swift exit from the pandemic and sending stock markets soaring.

The first vaccinations against Covid-19 in the European Union could take place in the first quarter of 2021 under an optimistic scenario, EU health agency chief Andrea Ammon told AFP in an interview.

But Lagarde stressed that policymakers will have to meet the challenge of bridging the gap until vaccination is widespread and the recovery can build momentum.

The strength of the rebound in the third quarter "suggests that the initial policy response was effective", she added.

The ECB's pandemic emergency bond-buying scheme, known as PEPP, is pumping 1.35 trillion euros ($1.6 trillion) into the eurozone and is likely to remain the main conduit for monetary policy to deal with the economic blow from the virus, Lagarde said.

Her speech comes a month ahead of a crunch monetary policy meeting in which the ECB is expected to boost its stimulus as European nations confront a second coronavirus wave that has triggered renewed shutdowns.

The ECB chief emphasised the "unusual recession" caused by the health crisis, with data showing a relatively resilient manufacturing sector and a services sector crippled by lockdowns.

Output in the services industry "may struggle to fully recover", a concern for the job market as the sector is "more labour-intensive", she said.

Five million people lost their jobs in the euro area in the first half of 2020, Lagarde said.

The 19-nation eurozone economy shrank by a record 11.8 percent in the second quarter.