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Lagarde urges EU to consider making recovery fund permanent tool

Frankfurt am Main

EUROPEAN Union leaders should consider whether the region's 750 billion euro (S$1.2 trillion) recovery fund could be made a permanent tool, according to European Central Bank president Christine Lagarde.

"This recovery plan tool is a response to an extraordinary situation," she said in an interview with France's Le Monde newspaper published on the ECB's website on Monday. "We should discuss the possibility of it remaining in the European toolbox so it could be used again if similar circumstances arise."

"I hope that there will also be a debate about a common budgetary tool for the euro area, and that it will be enriched by our current experience," she added.

While the ECB has long called for a common euro-area budget, Ms La-garde's remarks appear to go beyond her previous acknowledgment that the recovery fund is a "one-off" - a point she made in the European Parliament last month.

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That was in response to a question from a Dutch lawmaker asking if she believed the fund should be permanent, which the Netherlands strongly opposes. The ECB had previously said the tool could "imply lessons" for Europe.

Fiscal support has been a key plank in containing the region's economic crisis, alongside monetary stimulus. With policymakers growing increasingly concerned that the deteriorating health situation could place a further drag on the economy, Ms Lagarde pledged the ECB still has policy choices available if needed.

"The options in our toolbox have not been exhausted," she said. "If more has to be done, we will do more." She added: "Since the rebound we saw over the summer, the recovery has been uneven, uncertain and incomplete and now risks losing momentum. We will keep a close watch on indicators throughout the autumn." BLOOMBERG

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