ECB must enable governments to spend their way out of pandemic: report

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FILE PHOTO: A euro logo sculpture stands in front the headquarters of the European Central Bank in Frankfurt

FRANKFURT (Reuters) - The European Central Bank must keep borrowing costs super low to enable governments to spend their way out of a pandemic-induced recession, which threatens to hollow out production capacity, ECB board member Fabio Panetta told a Portuguese newspaper.

"Favourable financing conditions create the best environment for an effective fiscal policy, which in turn creates the conditions for the private sector to also take full advantage of the favourable financing conditions we ensure through our measures," Expresso quoted Panetta as saying on Friday.

The ECB has already flagged more policy easing at its December 10 meeting and said that more emergency bond buys and liquidity facilities for bank are likely to be its instruments of choice.

"There’s a lot more we can do through a combination of our asset purchase programmes and our measures to support the financing of the real economy through banks and the bond market," Panetta said, adding that there should be no doubts about the ECB's commitment to act.

To read the full text of the interview, click on: https://www.ecb.europa.eu/press/inter/date/2020/html/ecb.in201127~2420d2ff18.en.html

(Reporting by Balazs Koranyi; Editing by Ana Nicolaci da Costa)