Christine Lagarde, president of the European Central Bank (ECB), has warned against the impact of the coronavirus outbreak as it could spark an economic crisis in Europe similar to the 2008 financial crash, Bloomberg reported.
Lagarde held a call with EU leaders on Tuesday night to urge them to take action and raise spending in order to counter the economic effects of Covid-19, Bloomberg added citing a source with knowledge of the matter.
Europe would otherwise be at risk of a “scenario that will remind many of us of the 2008 Great Financial Crisis”, the eurozone’s central bank boss said.
Lagarde explained that the ECB was considering all of its options before convening its meeting scheduled for next Thursday, when it is widely expected to cut interest rates and expand its quantitative easing programme.
These options include monetary stimulus tools that would secure “super-cheap” funding for banks to make sure loans are readily available across the EU bloc and that cash continues to flow through the eurozone economy, Bloomberg reported.
Yet, Lagarde warned that the policy tools would only work if they had a full support from EU governments. The leaders need to ensure banks continued lending to businesses affected by the coronavirus outbreak, and ramp up their own fiscal stimulus measures, she added.
Economic shock could be temporary if met with the right response, Lagarde said.
The ECB president also reportedly hailed the actions of some countries but said more required to be done. She said the damage was likely to spread to other countries and that without bold action, leaders were increasing the risk of “the collapse of part of your economies”.
The ECB declined to comment to the Guardian.
On Wednesday morning, the Bank of England (BOE) announced an emergency interest rate cut in response to the coronavirus threat. It also unveiled a term funding scheme that could provide more than £100 billion ($129.4 billion) worth of cheap loans to companies, including small and medium-sized businesses that are struggling to cope with the impact of the flu-like virus outbreak.
