EU ready to loosen purse strings as coronavirus bites economy

BRUSSELS (Reuters) – The EU is considering measures to protect its economy against the impact of the novel coronavirus outbreak, top officials said on Monday, as health risks in Europe were raised to high after the virus spread to most countries in the bloc.

About 21,000 cases of coronavirus infections have been confirmed across 18 of the 27 EU states and 38 EU citizens have died, according to figures released on Monday by the European Commission, the EU’s executive.

The sudden outbreak of the disease in Europe since mid-February is pushing EU states to coordinate economic and health responses. It had previously been concentrated in China where it emerged in December.

“The EU is ready to use all the available policy options if and when needed to safeguard our growth,” EU economics commissioner Paolo Gentiloni told a news conference, saying risks threatened by the outbreak had now materialized.

He listed transport, tourism and carmakers among the sectors most affected.

European Central Bank Vice President Luis de Guindos said the ECB is also ready to help but that governments should be the first line of defense.

“Fiscal policy should be the main instrument that is used in response to this situation,” de Guindos said. “Our reaction has to be calm... and prudent.”

In an extraordinary conference call on Wednesday, EU finance ministers were expected to discuss immediate actions taken at national level to reduce risks of an economic crisis, Gentiloni said, including public support for healthcare and short-term liquidity measures. The teleconference was also expected to prepare the ground for a possible “coordinated fiscal response” to be decided in March by European finance ministers. That could involve extraordinary measures similar to those adopted to combat the 2008 global financial crisis, Gentiloni said, without giving more details.

Then, the EU introduced temporary exceptions to rules on state subsidies which allowed member countries to support their economies more freely.

In February, the EU’s economic powerhouse Germany dropped its traditional opposition to more investments at euro zone level as concerns about a slowdown grew.

In a further sign that the EU is adopting a more lenient approach to fiscal policy, Gentiloni praised measures announced by the Italian government to help its economy withstand Europe’s largest outbreak of coronavirus. The package of measures worth €3.6 billion ($3.5b.) was announced on Sunday by Finance Minister Roberto Gualtieri – even though it will further inflate Italy’s budget deficit – he described as “proportionate.”