ESM bailout fund could issue "corona bonds" to finance credit for governments

BRUSSELS, March 26 (Reuters) - The euro zone's ESM bailout fund could issue "Social Stability Bonds" or "corona bonds" if it needs to raise money for standby credit that euro zone governments can tap to fight the coronavirus epidemic, slides prepared by the fund showed on Thursday.

The European Stability Mechanism (ESM) fund, owned by euro zone governments, borrows money on the market to lend it on to sovereigns in need. But it does not usually name the bonds it issues.

The slides, prepared for a teleconference of EU leaders, showed that a credit line - should a government choose to apply for one - could be worth up to 2% of a country's GDP and be available for 12 months, with a possibility of extending that to up to two years.

If it is used, the money drawn would have to be repaid within an average period of five to 10 years, the slides showed.

The credit line, which also opens the possibility of unlimited bond purchases by the European Central Bank, under its Outright Monetary Transactions scheme, would carry a smaller than usual service fee, normally set at 85 basis points.

To get the standby credit, a government would need to have its debt sustainability assessed by the European Commission -- a condition the highly indebted Italy is not keen on.

The slides showed that the Commission would prepare a debt sustainability analysis for all euro zone countries by the end of March so that they can all apply for the credit, should they want to. (Reporting by Jan Strupczewski; Editing by Hugh Lawson)