Knot: COVID-19 Needs Fiscal Response

Monetary policy should not be the main line of defense for Europe against the economic impact of the coronavirus disease (COVID-19) pandemic, said Klaas Knot, the Governor of the Dutch Central Bank.

Knot, who is a member of the European Central Bank (ECB) Governing Council, said that a strong fiscal response could change the perception that everything depends on policies such as the bond purchase program.

“Such a perception is risky, as it leads to ratcheting up of debt levels and excessive leverage, as has been observed in segments of the corporate sector,” Know was quoted as saying by Bloomberg during a webinar on Friday.

The Dutch central bank governor indicated that the ECB may not fully utilize its COVID-19 program, with the Eurozone economy recovering from the crisis.

The Eurozone purchasing managers’ composite output index (PMI) recorded 48.5 in June, compared to 31.9 in May, reaching its best level in four months.