Spain’s Covid Slump Could Have Been Far Worse Without the ECB

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Spain suffered the euro zone’s worst slump after the Covid-19 pandemic erupted -- but it would have been much worse without speedy action from the European Central Bank, according to a new study, Bloomberg News reported. The ECB’s bond-buying and liquidity lines kept credit flowing, sovereign-debt costs steady and permitted extra public spending, BBVA Research economists Sonsoles Castillo, Rafael Domenech and Miguel Jimenez said in the paper, published Tuesday. They calculated that the assistance saved Spanish gross domestic product from plunging by an additional 3 percentage points or more, with an indirect benefit of about 8 percentage points. ECB measures “particularly favored the countries of the periphery, by eliminating any signs of financial fragmentation and the reappearance of the risk of a breakup of the euro, as happened during the sovereign-debt crisis after the Great Recession,” the authors said. While Spain’s tourism-reliant economy has rebounded since shrinking 11% in 2020, some ECB officials are pushing for an interest-rate hike this year that other policy makers warn risks choking the region’s recovery. Read more.
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