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By Luke Heighton
     FRANKFURT (MNI) - The proportion of loans to grants agreed as part of the
European Union's Covid-19 crisis rescue package is "reasonable," European
Central Bank president Christine Lagarde said Wednesday, though she admitted the
level of allocations fell some way short of what she had hoped for.
     "The proportion is reasonable," Lagarde told the Washington Post in a live
online interview. "It's a good balance. It could have been better, but it's a
very ambitious project."
     Lagarde said she currently expects annual real euro area GDP to fall by
8.7% in 2020 before rebounding in 2021 and 2022, in line with the ECB's June
baseline scenario projections.
     Asked what course she expected the recovery to take, Lagarde said she was
"not sure what letter of the alphabet our forecast would correspond to," given
its uneven and uncertain nature. "Based on what we know - and barring a massive
second wave - we certainly don't see a W."
     Europe's post-pandemic economy will likely see an acceleration of
transformations already taking place, Lagarde said, leading to an economy that
is "more green, more digital, and that will value proximity more than it did
before.
     "Will that entail industrial sunset and the rise of new supply chains that
will be more partner based? It would seem like it, but it's difficult to predict
what will happen."
     "Multilateralism is not dead," she continued, "but I believe that those
natural re-framings of our economies are going to have to be mindful of what
happens in other corners of the world to make sure it is sustainable."
     In contrast to the Fed, Lagarde noted, the ECB has only one mandate: price
stability. "But price stability can be significantly affected by climate change.
The two are intrinsically related and bound."
--MNI Frankfurt Bureau; +49-69-720-146; email: luke.heighton@marketnews.com
--MNI London Bureau; +44 203 865 3829; email: jason.webb@marketnews.com
[TOPICS: M$X$$$,MX$$$$,M$$EC$]