ECB's Lagarde urges quick EU recovery plan as economy in "dramatic fall"

The faster the package is agreed, the better for the EU economy," she said, according to officials.

European Central Bank head Christine Lagarde urged European Union leaders on Friday to quickly agree on a recovery package that would pull the economy from a "dramatic fall" or risk a change in sentiment on markets, which were expecting a deal soon.

Lagarde addressed EU leaders, meeting by videoconference to wrangle over how to engineer a recovery from the deep recession caused by three months of coronavirus lockdowns in most European countries. "(The) EU economy is experiencing a dramatic fall," she told the gathering, according to officials.

"Decisive and effective action by both national governments and European actors has proven its worth: they paved the way for a rebound towards year-end and helped to buy some time. This is reflected in market sentiment, but failure to deliver could lead to a change in that sentiment," she said. Lagarde reiterated the ECB's forecasts that the eurozone economy would shrink 13% in the second quarter from the first, and contract 8.7% overall in 2020, before rebounding by 5.2% in 2021.

She said the worst impact of the pandemic on labor markets was still to come, and that unemployment, now at 7.3% of the workforce, could rise to 10%, hitting young people particularly hard. "It's in our own hands to forge the recovery we want to see," she said.

"The recovery package should be far, fast, flexible, and firmly anchored in economic reforms. The faster the package is agreed, the better for the EU economy," she said, according to officials.