ECB ‘working on lending scheme’ for small businesses hit by coronavirus
The European Central Bank is reportedly working on measures to provide liquidity to businesses hit by the economic impact of the coronavirus outbreak.
Measures being considered by the ECB include a targeted longer-term refinancing operation directed at small and medium-sized firms, which could be hardest hit by a virus-related downturn, sources familiar with the discussion told Reuters.
No decision on the scheme is imminent as preparatory work on it would take time, the news service reported.
ECB president Christine Lagarde said last night that the bank was ready to take “appropriate and targeted” measures over the Covid-19 epidemic.
Sources told Reuters that while the ECB has done preparatory work for such refinancing schemes in the past, the central bank’s Governing Council is yet to discuss the measures, so they would still face considerable scrutiny before they could be implemented.
The rationale for such measures is that smaller firms generally have more restricted access to credit and would consequently take a bigger hit from any downturn linked to the outbreak, while large firms can already benefit from the ECB’s corporate sector bond purchases.
An ECB source told Reuters that some members of its rate-setting Governing Council still regard the issue as short-term and largely outside the scope of monetary policy, arguing that it mainly requires a fiscal response.
Yesterday, the OECD warned that the coronavirus outbreak was the “gravest threat” to the global economy since the 2008 financial crisis.
The organisation said the epidemic could halve global growth, and also made a series of downgrades to specific countries’ growth forecasts.
The ECB has been contacted for comment.