EU finance ministers promised on Wednesday (4 March) a coordinated response to address the economic impact of coronavirus but postponed any decision at least until their formal meeting in mid-March.
The ministers held a teleconference to coordinate national responses to the fallout of the so-called COVID-19 and explore possible additional measures.
“Given the potential impact on growth including the disruption of supply chains, we will coordinate our responses and stand ready to use all appropriate policy tools to achieve strong, sustainable growth and safeguard against further materialisation of downside risks,” Eurogroup President Mario Centeno said in a statement after the conference call.
Centeno said the response could include fiscal stimulus, as “they may be needed” to support growth.
But the EU ministers postponed any decision at least until the next Eurogroup meeting in Brussels, due to take place on 16 March.
They mandated their deputies to prepare options, including fiscal, financial and structural policies, to be discussed in the Eurogroup meeting.
Some EU countries are already adopting economic packages to address the impact of the outbreak. Italy has adopted a €4.5 billion aid package while Spain is also working on measures to support companies affected by the disease.
The Spanish government recommended companies on Wednesday to suspend their activity if there was a risk of contagion for their employees.
As national governments are preparing to increase their expenditure to support the weakening growth, the European Commission has already said that the Stability and Growth Pact, the set of EU fiscal rules, is flexible enough to deal with unforeseen events such as the coronavirus.
The Pact’s flexibility clauses “can be used to the extent needed, provided that additional spending is proved to be linked with the unusual event and if it is only of temporary nature,” Centeno said.
The Eurogroup’s prudent response came a day after G7 countries also decided not to act at this stage.
Some central banks, however, are acting to counter the impact of the virus, which is damaging the supply side, consumers and companies’ investment and consumption.
Following the US Federal Reserve’s decision to cut interest rates, the ECB Governing Council also held an unscheduled teleconference to assess the impact of the outbreak, but no policy action was adopted, two sources told Reuters.
The ECB members discussed operational and business continuity issues and there was no debate on whether the ECB should enact policy measures like its US counterpart did, the sources said.
Meanwhile, the Frankfurt-based institution also cancelled public events that were part of its one-year strategic review, the ECB said in a statement on Wednesday.
The spread of the virus is expected to have a considerable impact on the European economy but the Commission has not yet factored in the damage.
Nevertheless, some member states are already updating their forecasts. Sweden lowered by around 0.3% its expected GDP growth expected for this year, its Finance Minister Magdalena Andersson said on Wednesday.
In January, the government forecast gross domestic product would expand 1.1% this year.
[Edited by Zoran Radosavljevic]