MNI POLICY: ECB May Cut December Macro Projections - Lagarde

Europe's recovery from the economic effects of the Covid-19 pandemic faces increased uncertainty as a result of recent increases in the infection rate, Christine Lagarde said Monday, raising the possibility the European Central Bank may be forced to downgrade its macroeconomic projections.

The euro zone already faced an "uneven, uncertain and incomplete" recovery prior to the pandemic's second wave, which has hit France especially, the ECB president told a French newspaper, with the resulting new restrictions "adding to the uncertainty and weighing on the recovery."

The recovery "now risks losing momentum," she added. "If the situation deteriorates, our projections, which we will revise in December, will obviously be gloomier."

Job losses are likely to be the most serious economic scar left behind by the pandemic, Lagarde continued, and she called on euro area governments to be "extremely mindful" of the danger posed. "We think it's essential that the fiscal safety nets that governments put in place during this crisis are not withdrawn too soon," she said.

The ECB president described the European Rescue Fund as a "extraordinary plan, which has broken significant taboos in certain countries."

However, "if it is not targeted, if it gets lost in an administrative labyrinth and does not support the real economy in reorienting our countries to be more digital and green, we will have missed a historic opportunity to make a real difference," she said.