Recently, several calls have been made for the ECB to cancel part of its government debt holdings. Such an operation would violate the EU Treaty. On economic grounds, it is unnecessary, given that the interest paid on the debt to the ECB flows back to governments in the form of dividends. It would actually entail a cost: higher inflation expectations and/or a higher inflation risk premium would cause an increase in bond yields. The extreme nature of the measure could also undermine confidence. In reality, the very low levels of interest rates imply that governments have a lot of time to bring their finances in better shape
A robust and lasting normalisation of the economic situation will depend on gaining full control over the Covid-19 pandemic and on the renewed confidence of economic agents. Yet the Eurozone economy is struggling to recover in the midst of persistent lockdown measures and health restrictions. After a robust economic rebound in late spring 2020, the recovery phase has virtually levelled off thereafter.
Retail and leisure traffic flows are increasing in some countries and declining in others according to the Google Mobility Report released on 14 February.
