The euro area economy was struck by the extraordinary and severe coronavirus (COVID-19) pandemic shock in 2020. Economic activity contracted sharply during the first half of the year as a consequence of lockdown measures and heightened risk aversion. The strong and coordinated monetary and fiscal policy reaction, combined with positive news on vaccines, helped stabilise activity in the second half of the year. Overall, euro area GDP contracted by 6.6% in 2020. Annual headline inflation declined to 0.3%, from 1.2% in 2019, in large part as a result of falling energy prices, although there were also factors relating to the pandemic. For example, sectors that were hardest hit by the crisis, such as transport and hotels, contributed to the fall in inflation during the second half of the year.
The ECB substantially eased its monetary policy stance to counter the negative impact of the pandemic on the euro area economy, through a comprehensive set of measures that were recalibrated in the course of the year. This included: introducing a new, temporary, pandemic emergency purchase programme; relaxing eligibility and collateral criteria; and offering new longer-term refinancing operations. The monetary policy response was a crucial stabilising force for markets and helped to counter the serious risks posed by the pandemic to the monetary policy transmission mechanism, the outlook for the euro area economy and, ultimately, the ECB's price stability objective. In addition, macroprudential policies focused on maintaining the flow of credit to the economy, while ECB Banking Supervision introduced microprudential measures to moderate the impact of the crisis and promote the resilience of the European banking sector.
In January, the Governing Council launched a review of the ECB's monetary policy strategy, to ensure it remains fit for purpose. The review aims to thoroughly analyse the implications of the profound changes that have occurred since the previous review in 2003. These include the persistent decline in inflation and equilibrium interest rates, and the impacts of globalisation, digitalisation and climate change. The review will consider whether and how the ECB should adjust its monetary policy strategy in response, and is expected to be concluded in the second half of 2021.
The ECB is exploring all possible ways within its mandate in which it could contribute to limiting the potentially substantial economic and social consequences of climate change. This includes careful analysis across relevant policy areas, investing the ECB's pension fund and own funds portfolios in a sustainable and responsible fashion and focusing on the carbon footprint of the ECB itself. The ECB has recently created a climate change centre in order to shape and steer its climate agenda.
The Eurosystem has developed a comprehensive retail payments strategy to harness the innovative potential of digitalisation, focusing on enabling instant payments, developing a pan-European payment solution and investigating the possibility of a digital euro. A public consultation on a digital euro was launched in October 2020 to ensure that any new form of money and payments the Eurosystem may provide would retain the public's trust.
The ECB enhanced its communication and outreach in 2020 to meet the challenges posed by the pandemic and to better understand the economic concerns and imperatives of European citizens. It also introduced the ECB Blog. 19 posts were published in 2020, with many focusing on the ECB's response to the crisis. The first ECB Listens event took place in October 2020, and the ECB Listens Portal received almost 4,000 comments on the monetary policy strategy.
2020 was a year of intense and urgent activity, which was conducted in close cooperation with European institutions but also with other central banks across the world to confront the immense exogenous shock faced by the global economy. The ECB played its part.
