INTERVIEW-EU eyes use of bailout fund to unlock unlimited ECB bond buying

By Jan Strupczewski

By Jan Strupczewski

BRUSSELS, March 21 (Reuters) - The European Commission next week is likely to present a tool for the euro zone's ESM bailout fund to fight the effects of the coronavirus epidemic that could unlock unlimited ECB sovereign bond purchases, Vice President Valdis Dombrovskis said.

The EU executive arm has been asked by euro zone finance ministers, the European Stability Mechanism (ESM) and the European Central Bank to come up with a instrument to involve the fund in supporting economies hit by the coronavirus, he said.

The ESM has 410 billion euros ($438 billion) of unused lending power.

"This work is ongoing," Dombrovskis said. "One of the issues is the size of ESM programmes, which may be limited given it was primarily created to respond to asymmetric economic shocks and here we have a symmetric shock which affects all member states."

"From that point of it is important to have a dedicated ESM tool which would help in case of necessity to unblock Outright Monetary Transactions of the ECB, which can buy bonds in unlimited quantities if necessary," Dombrovskis said.

The Commission expects the pandemic, which has triggered lockdowns in most EU countries and put whole sectors of the economy out of action, to mean a 1%-2.5% EU recession or worse versus the previously expected 1.4% economic growth this year.

The ESM now has the Enhanced Conditions Credit Line (ECCL) which it can extend to a government in need under certain conditions, but some officials worry the offer could carry a stigma of financial trouble in the eyes of the market.


PAVE WAY FOR UNLIMITED ECB ACTION

Yet securing the ECCL, together with the possibility of the ESM buying a government's bonds at primary auctions, would make the government eligible for the ECB's OMT programme.

This is key because given the scale of support needed in case the whole euro zone needs help, the ESM's resources would not be enough, top euro zone officials said. But the size of an ESM credit line would be irrelevant if it paved the way for ECB action - enough to calm down markets.

Whatever instrument euro zone ministers agree to use for the ESM -- the ECCL or something new -- would probably be set in a way that makes all euro zone countries eligible for it, even if not all apply to get it, officials said.

Germany and the Netherlands, sporting large budget surpluses and falling debt, do not need support.

To provide the credit, the ESM would have to, as always, borrow more cheaply on the market via what officials say would be called "coronabonds" to make clear money from the operation would go only towards fighting the effects of the epidemic.

EU finance ministers will hold a teleconference on Monday on the coronavirus and Dombrovskis said the Commission would then present its ideas on how to use existing ESM tools or how to create a new one.

"Whether it is the ECCL or some dedicated tool -- that is still being worked on," he said, noting there is no urgency regarding the ESM's involvement given the ECB programme announced last week for bond purchases worth 750 billion euros.

"It is not urgent because all member state have access to markets and the pandemic programme from the ECB is helping very substantially, but we will make an effort to have it for the next Eurogroup meeting early next week," he said.


EMERGENCY UNEMPLOYMENT RE-INSURANCE

The Commission is separately accelerating work on a European unemployment re-insurance scheme, scheduled for presentation in the fourth quarter. It will change to function as an emergency tool for now, rather than a permanent feature of the euro zone architecture.

An 2020 recession caused by the epidemic would likely strongly boost unemployment making an euro zone-wide unemployment re-insurance scheme, based on loans that can be repaid during economic good times, very valuable.

"The legal basis is going to be EU Treaty article 122.2 and we will propose it as a temporary, emergency instrument," he said.

In case non-euro zone countries of the EU needed financial help, the Commission could use its Balance of Payments facility, for which it can borrow against the collateral of the EU budget.

($1 = 0.9351 euros) (Reporting by Jan Strupczewski; editing by Jason Neely)

  • Trump berates reporters during coronavirus briefing: 'You will never make it'
    Yahoo News

    Trump berates reporters during coronavirus briefing: 'You will never make it'

    Trump used Monday's briefing of the coronavirus task force to lash out at several members of the press, despite having recently praised media coverage of his response to the crisis as “very fair.” After kicking off the briefing by praising his own administration for its response to the ongoing coronavirus outbreak, Trump opened the briefing up to questions, during which he refused to acknowledge any criticism of his handling of the pandemic that has brought the United States to a virtual standstill. One point of contention was a report released today by the inspector general of the federal Department of Health and Human Services.

  • US sees coronavirus window to push Taiwan's global status
    Associated Press

    US sees coronavirus window to push Taiwan's global status

    The Trump administration is seizing the opportunity of the coronavirus pandemic to push a cause that has long been an irritant in U.S. relations with China: Taiwan. The virus has added yet another dimension to U.S.-China tensions that were already wracked by a trade war and heated discussions over intellectual property, human rights and Chinese policies in Hong Kong and the South China Sea. And, while U.S.-China differences over Taiwan have waxed and waned for decades, they have persisted and are reaching new heights as the world grapples with the exponential spread of the COVID-19 virus.

  • Coronavirus live updates: Boris Johnson in intensive care, U.S. death toll tops 10,000
    NBC News

    Coronavirus live updates: Boris Johnson in intensive care, U.S. death toll tops 10,000

    The number of deaths in the U.S. topped 10,700 by Monday night, according to NBC News' tally. The rising toll comes as Dr. Anthony Fauci, the nation's top infectious diseases expert, said Sunday that the U.S. is "struggling" to get the coronavirus outbreak under control. The number of confirmed cases in the U.S. has passed 337,000.

  • As New York Posts Highest One-Day Death Toll, Cuomo Says No Victim Died ‘Because We Couldn’t Provide Care’
    National Review

    As New York Posts Highest One-Day Death Toll, Cuomo Says No Victim Died ‘Because We Couldn’t Provide Care’

    New York Governor Andrew Cuomo said Tuesday that no victim of the coronavirus has died because the state could not provide health care for them, even as New York posted its highest number of deaths in one day. A record 731 New Yorkers died between Monday and Tuesday, Cuomo reported. The governor warned Thursday that New York state only had enough ventilators for six days and was considering how to increase the supply.

  • Dr. Fauci says America getting back to normal and where it was before the coronavirus crisis 'might not ever happen' without a vaccine
    Business Insider

    Dr. Fauci says America getting back to normal and where it was before the coronavirus crisis 'might not ever happen' without a vaccine

    Alex Brandon/AP Dr. Anthony Fauci said that the United States might never get entirely back to where it was before the novel coronavirus outbreak, especially without a vaccine. "If you want to get back to pre-coronavirus, that might not ever happen in the sense that the threat is there," Fauci said, expressing optimism that new therapies and a vaccine will help the US recover. Fauci said that with "the therapies that will be coming online, and the fact that I feel confident that over a period of time we will get a good vaccine, that we will never have to get back to where we are right now."

  • Brazil minister offends China with 'racist' virus tweet
    AFP

    Brazil minister offends China with 'racist' virus tweet

    China demanded an explanation from Brazil Monday after the far-right government's education minister linked the coronavirus pandemic to the Asian country's "plan for world domination," in a tweet imitating a Chinese accent. In the latest incident to strain ties between Brasilia and Beijing, Education Minister Abraham Weintraub insinuated China was behind the global health crisis. "Geopolitically, who will come out stronger from this global crisis?" he wrote on Twitter Saturday.

  • Coronavirus wreaks havoc in African American neighbourhoods
    BBC

    Coronavirus wreaks havoc in African American neighbourhoods

    Stark statistics from Chicago health officials have underscored the heavy toll of coronavirus on black Americans. Black Chicagoans account for half of all coronavirus cases in the city and more than 70% of deaths, despite making up 30% of the population. Other cities with large black populations, including Detroit, Milwaukee, New Orleans and New York, have become coronavirus hotspots.

  • Which countries have flattened the curve?
    CBS News

    Which countries have flattened the curve?

    Flattening the curve does not necessarily mean seeing a decrease in total cases right away; it would first produce a decline in the number of new cases, which should result in fewer hospitalizations and death in the weeks that follow. With some of the most affected countries like Spain and Italy on lockdown for weeks, many are wondering if their efforts are actually working. Italy has been under a nationwide lockdown for about four weeks and the country has begun to flatten the curve.

  • Bloomberg

    Japan Virus Emergency Counts on Citizens to Lock Themselves Down

    The declaration would cover seven regions including Tokyo and Osaka and last for about a month. Due to civil liberties enshrined in Japan's postwar constitution, the government cannot send police to clear people off the streets, as has happened in places including France, Italy and the U.K. The country's strongest enforcement measure could be public obedience -- and it remains to be seen whether that will be enough. The prevalence of the virus varies widely among the country's 47 regions and prefectures, with Tokyo seeing a rapid surge and three regions yet to confirm any cases as of April 5.

  • Sailors reportedly 'livid' with acting Navy secretary after he blasts captain who expressed coronavirus concerns
    Yahoo News

    Sailors reportedly 'livid' with acting Navy secretary after he blasts captain who expressed coronavirus concerns

    A speech by acting Navy Secretary Thomas Modly to the aircraft carrier crew whose captain he relieved April 2 has exposed him to accusations of hypocrisy and led to calls for him to be fired. Modly said Thursday that he relieved Capt. Brett Crozier for circulating too widely a memo expressing the captain's concerns about how the Navy was handling a COVID-19 outbreak that had forced his ship, the USS Theodore Roosevelt, to remain docked in Guam. The acting secretary doubled down on that criticism in his remarks Monday to Crozier's crew, telling them that if the captain hadn't realized that emailing the memo to “over 20” people meant it was likely to go public, then Crozier was either “too naive or too stupid” to be left in command.

  • Mideastern burial traditions clash with fears of contagion
    Associated Press

    Mideastern burial traditions clash with fears of contagion

    Mohammed al-Dulfi's 67-year-old father died on March 21 after a brief struggle against the new coronavirus, but it would take nine days for his body to find a final resting place in the Shiite holy city of Najaf in southern Iraq. On two occasions, the family rejected remote burial plots proposed by the government outside Baghdad for him and seven other coronavirus victims, al-Dulfi said. A fight broke out between the families and the Health Ministry's team.

  • Illinois man who feared girlfriend had COVID-19 fatally shoots her, himself
    NBC News

    Illinois man who feared girlfriend had COVID-19 fatally shoots her, himself

    All of the doors and windows were locked from the inside, according to the sheriff's office. Patrick Jesernik, 54, and Cheryl Schriefer, 59, were found dead in separate rooms with obvious signs of trauma to their heads, the sheriff's office said in a statement. The couple, who were not married, had been together for eight years, according to Cathy Hoffmeyer, a spokeswoman for the sheriff's office.

  • USA TODAY

    If you sailed on these cruise ships, you may have been exposed to coronavirus

    Cruises where passengers became symptomatic while on ships The CDC was notified that passengers who were symptomatic while onboard the following sailings have since tested positive for COVID-19. Included in this list is the Feb. 21-March 7 sailing of Princess Cruises' Grand Princess, which docked in Oakland, California, two days after it was due to disembark in San Francisco. At the time, the ship had 21 positive cases.

  • How the Coronavirus Death Toll Compares to Other Deadly Events From American History
    Time

    How the Coronavirus Death Toll Compares to Other Deadly Events From American History

    When the White House projected on March 31 that, even with social distancing measures, 100,000 to 240,000 Americans could die of COVID-19, the numbers were not necessarily shocking to those who had been paying attention. Dr. Anthony Fauci, director of National Institute of Allergy and Infectious Diseases, had already said he projected between 100,000 to 200,000 U.S. deaths, and estimates by the Institute for Health Metrics and Evaluation (IHME) at the University of Washington are not much different, projecting 81,766 American deaths by Aug. 4, as of Monday afternoon. White House is now setting the goal posts at 100-200K dead as a good job.

  • Iran supreme leader approves withdrawal of 1 billion euros from sovereign wealth fund to fight coronavirus
    Yahoo News Video

    Iran supreme leader approves withdrawal of 1 billion euros from sovereign wealth fund to fight coronavirus

    Iran's Supreme Leader Ayatollah Ali Khamenei has approved the withdrawal of 1 billion euros from the country's sovereign wealth fund to help fight the coronavirus epidemic, President Hassan Rouhani's official website said on Monday.

  • Mumbai hospital shut after surge in cases among staff
    AFP

    Mumbai hospital shut after surge in cases among staff

    A major private hospital in Mumbai was shut to new patients and declared a coronavirus containment zone on Monday after 26 nurses and three doctors tested positive, an official said. Since the virus hit India -- which has been under lockdown since March 25 with 111 deaths so far -- medical workers have complained about not being given adequate protective gear. Mumbai city authority spokesman Vijay Khabale-Patil told AFP that the Wockhardt Hospital has been declared a "containment zone" after the cases were confirmed.

  • Saudi Arabia says it could reach 200,000 coronavirus infections
    Reuters

    Saudi Arabia says it could reach 200,000 coronavirus infections

    The new coronavirus could eventually infect between 10,000 and 200,000 people in Saudi Arabia, the kingdom's health minister said on Tuesday, urging the public to adhere more closely to state directives against mixing and movement. The country of some 30 million has so far reported 2,795 cases and 41 deaths, the highest in the six-nation Gulf Cooperation Council (GCC), despite halting all passenger flights, suspending most commercial activities and imposing a 24-hour curfew in major cities including the capital Riyadh. "We stand today at a decisive moment as a society in raising our sense of responsibility and contributing together with determination to stop the spread of this pandemic," Health Minister Tawfiq al-Rabiah said in a rare televised address.

  • Coronavirus: Japan to declare emergency as Tokyo cases soar
    BBC

    Coronavirus: Japan to declare emergency as Tokyo cases soar

    Japan is to declare a state of emergency in the capital Tokyo and six other regions in an attempt to tackle the rapid spread of coronavirus. Prime Minister Shinzo Abe said the move could come as early as Tuesday. Japan has a relatively small number of infections compared to other countries, but there are concerns a sudden surge in cases in Tokyo could lead to a major outbreak in the world's biggest city.

  • India drops drug export ban after Trump threatens "retaliation"
    CBS News

    India drops drug export ban after Trump threatens "retaliation"

    Hours after President Donald Trump warned of "retaliation" if Indian Prime Minister Narendra Modi refused to allow the export of an anti-malarial drug being tested as a possible treatment for the new coronavirus, India said it would supply , with the number of confirmed patients doubling in four days. Nearly 4,800 people have been infected so far and 124 have died despite an ongoing three-week nationwide lockdown set to end on April 14. The lockdown seems to have slowed the spread of the coronavirus to a large extent, given the population densities of the world's second most populous nation, but experts believe the number of cases could still swell to hundreds of thousands.

  • Supreme Court rejects church challenge to ban on bus ads
    Associated Press

    Supreme Court rejects church challenge to ban on bus ads

    The Supreme Court on Monday rejected an appeal from a Catholic church in Washington, D.C., that sought to place religious-themed ads on public buses. The justices are leaving in place a federal appeals court ruling that found no fault with the Washington transit agency policy that banned all issue-oriented advertisements on the region's rail and bus system. The Roman Catholic Archdiocese of Washington sought to place an ad on the outside of public buses in the fall of 2017.

  • Congo mine gun attack kills three Chinese nationals: Xinhua
    Yahoo News Video

    Congo mine gun attack kills three Chinese nationals: Xinhua

    A gun attack in a mining area in the Democratic Republic of Congo has killed three Chinese nationals, China's official Xinhua news agency reported, citing the Chinese embassy in the mineral-rich central African country.

  • Bloomberg

    Slovenia’s Nationalist Leader Wins Faster Passage of Crisis Laws

    Slovenia's parliament banned people who oppose legislation from delaying crisis laws via referendums, accelerating the government's ability to fight the coronavirus. Lawmakers approved the bill on Tuesday despite concerns from some opposition members that nationalist Prime Minister Janez Jansa may leverage the faster process to consolidate power. He's a vocal admirer of Hungarian Premier Viktor Orban, who won the right to lead his country solely by decree last week.

  • U.S. reports 1,200 coronavirus deaths in one day as China lifts lockdown
    NBC News

    U.S. reports 1,200 coronavirus deaths in one day as China lifts lockdown

    At the start of what is expected to be the deadliest week of the coronavirus pandemic in the United States, the White House tried to offer some hope that measures to contain the spread were working. The virus killed 1,264 over 24 hours in the U.S. as of 2:05 am ET on Tuesday, according to NBC New's tracker. Meanwhile China, where the pandemic broke out, claimed that not a single new death was reported, and the city of Wuhan in Hubei province, where the new virus was first identified, prepared for lockdown measures to be lifted.

  • Airlines including American, Delta, and United are slashing flights from New York as the region prepares for the worst weeks yet of the COVID-19 pandemic
    Business Insider

    Airlines including American, Delta, and United are slashing flights from New York as the region prepares for the worst weeks yet of the COVID-19 pandemic

    United Airlines, American Airlines, and Delta announced massive cuts to its New York City-area flights, as the region braces for the worst weeks of the coronavirus outbreak. United was left with just 17 flights a day from Newark and LaGuardia — down from 460 the previous year. American was down to a total of 14 from LaGuardia, JFK, and Newark, one of which will be cut later this week, down from 270 last April.

  • Coronavirus Model Used by White House Changed to Reflect Decrease in Projected Fatalities
    National Review

    Coronavirus Model Used by White House Changed to Reflect Decrease in Projected Fatalities

    A coronavirus projection used by the White House to warn that the country could face between 100,000 and 200,000 deaths in a “best case scenario” has dramatically reduced its estimates, cutting the number of hospital beds needed by 58 percent and the death forecast by 12 percent. The IHME model, produced by the University of Washington, updated its numbers overnight to show that projected deaths decreased from 93,531 to 81,766, and the projected total bed shortage fell from 87,674 to 36,654, after projected needed hospital beds fell 45 percent from 262,000 to 141,000 and needed ICU beds decreased 26 percent from almost 39,700 to 29,200. New Jersey's projection rose dramatically from 2,100 to 9,690, while the projection for Illinois remained essentially the same.