The Global Economy Comes Before Savers: ECB President Christine Lagarde Defends Negative Interest Rates

The European Central Bank President Christine Lagarde is keeping the central bank’s monetary easing policies unchanged according to her statements from a press conference last Thursday. Moreover, the central bank’s Twitter account recently shared a video of Lagarde defending negative interest rates, as the bank’s President stresses that they “support companies and people in the eurozone.”

ECB President Christine Lagarde Wants to Preserve Favorable Financing

Since well before Covid-19, a great number of central banks started to initiate monetary easing practices and pushing interest rates down to zero or below. On Thursday, Lagarde spoke during a press conference after the European Central Bank (ECB) decided to keep policies the same after keeping rates below zero and issuing lots of fiat. Lagarde says that the financing conditions must be maintained to fend off the economic effects of the global pandemic.

“Preserving favorable financing conditions over the pandemic period remains essential to reduce uncertainty and bolster confidence, thereby underpinning economic activity and safeguarding medium-term price stability,” the ECB President Lagarde emphasized on Thursday to members of the press.

The ECB also said last month that the central bank was planning on increasing government bond purchases and data shows the bank did just that. Statistics from Deutsche Bank indicate that the ECB acquired 74 billion euros in bonds in March after it only purchases 53 to 60 billion euros during the first two months of 2021. On Thursday, the ECB highlighted that the increase in government bond purchases would continue to expand.

“The Governing Council expects purchases under the PEPP over the current quarter to continue to be conducted at a significantly higher pace than during the first months of the year,” the ECB said during the press conference last week.

Lagarde Speaks About the Resentment of Savers, ‘We Have to Look at the Whole Economy’

Further on April 23, the ECB’s official Twitter account wanted the public to “watch” a video featuring Lagarde defending negative interest rates in a video-tweet. “President Lagarde responds to criticism about negative interest rates and describes how they support companies and people in the eurozone,” the ECB account stated. In the video, Lagarde does defend negative interest rates as she believes they are good for the people who need them.

“I completely appreciate that people who are saving are not satisfied with being charged the negative consequences of negative rates, but we have to look at the situation from a global point of view,” Lagarde said in the video. “We cannot look at a particular depositor, or a particular category, we have to look at the whole economy.”

Lagarde further added:

And we know that by putting in place those negative interest rates, we are effectively supporting the economy, encouraging enterprises, families, households, young couples, to actually borrow at very low rates in order to invest… In order to buy their first apartment, in order to buy some equipment, and you know, the contribution makes sure that jobs are kept. In order to make sure that corporates can continue to operate and produce is clearly a trade-off. Against some aspects that are resented by those that are only savers and are not borrowers.

The ECB’s tweet didn’t go over so well on Twitter as the commentary Lagarde made was controversial, to say the least. “Sure, don’t incentivize savers, but encourage borrowers,” one person replied to the tweet. “The only way to make sure that a slave society is firmly in place,” the individual added. Another person responded: “The frantic gasps of a drowning system. The saving/borrowing/interest rate/taxation levers used to steer capitalism quite well.”

The individual who remarked about the slave society stressed:

Yep. The balance is now fully broken. Not sure what the end game is but it won’t be pretty. For us anyway.