FRANKFURT, March 19 (Xinhua) -- The European Central Bank (ECB) on Wednesday night announced an emergency bond-buying program of 750 billion euros (800 billion U.S. dollars) to counter the coronavirus risks. Dubbed the "Pandemic Emergency Purchase Program" (PEPP), it shows determination at European level to battle the current crisis and has been welcomed by policymakers and experts.
The temporary asset purchase program of private and public sector securities will last until the end of 2020. The ECB has unveiled plans of a 120-billion-euro asset purchase program last Thursday as part of a comprehensive policy response to coronavirus.
"Extraordinary times require extraordinary action. There are no limits to our commitment to the euro. We are determined to use the full potential of our tools, within our mandate," ECB President Christine Lagarde tweeted following Wednesday's announcement.
Details of the ECB Governing Council decisions showed that the central bank has switched on "emergency mode" and taken into account as many contingencies as possible. It waived the eligibility requirements for Greek government bonds and, for the first time, included non-financial commercial papers in its list of eligible assets for purchases.
The central bank also said it will consider revising some self-imposed limits should they hamper the action that the ECB is required to take in order to fulfil its mandate.
WIDELY WELCOMED
The latest ECB decisions were welcomed by Charles Michel, president of the European Council. "Europe is pursuing a forceful economic response to the #CoronaCrisis. No efforts will be spared to contain #COVID19 and shield our economies from further damage," Michel tweeted.
"Total support for the exceptional measures taken by the ECB last night," French President Emmanuel Macron tweeted on Thursday, adding that "it is up to our European states to do their bit, through our fiscal measures and greater financial solidarity within the eurozone."
Greek Finance Minister Christos Staikouras said on Twitter that as much as 12 billion euros of Greek bonds are now eligible for purchase, which could bring liquidity to the real economy. It is the first time since 2015 that Greece is able to participate in the ECB's quantitative easing program, he said.
The ECB's loud and clear response was also welcomed by experts, as many have been waiting for strong action at European level to alleviate the current crisis. Janis Emmanouilidis, director of studies at the European Policy Centre in Brussels, called it "a great move" that "shows courage and determination."
This is exactly what is needed to help stop the situation from spiraling out of control and allows the bloc's 27 members to apply adequate and coordinated fiscal measures to do "whatever it takes" to cushion the economic effects of COVID-19, Emmanouilidis said.
"The coronavirus crisis threatens to set off a major financial and debt crisis. The ECB is trying by all means to back up the corona containment policy and buy time," said German economist Friedrich Heinemann at the economic research center ZEW.
"Just as in the euro debt crisis of 2012, Europe's central bank is again proving to be capable of acting responsibly in view of a looming major systemic crisis and European politics still being in a state of shock," Heinemann said.
ACT QUICKLY
As of Wednesday, the total number of COVID-19 cases in Europe had surpassed 80,000. Researchers have painted a gloomy picture for the eurozone economy as many countries move to halt public life and introduce stricter border controls, causing difficulties for big companies and small businesses alike.
Deutsche Bank economists said on Wednesday that they forecast a severe global recession occurring in the first half of 2020, with aggregate demand in the eurozone plunging in the second quarter by 24 percent.
Economists at the German research institute IfW Kiel said on Thursday that they had to lower previous economic forecasts due to the recent developments, expecting Germany's gross domestic product (GDP) to decline by between 4.5 percent and nine percent in 2020, depending on whether the current "lockdown" lasts until the end of April or the end of July.
The Berlin-based German Institute for Economic Research (DIW) noted in a statement on Thursday that the current crisis "should be countered quickly and massively."
"Politicians should now continue to act decisively: build bridges with liquidity aid and short-time work compensation, declare readiness for a significant impetus for demand and organize coordination between the governments," said Claus Michelsen, head of forecasting and economic policy at the DIW.
Sascha Steffen, professor of finance at the Frankfurt School of Finance and Management, told Xinhua in an interview on Tuesday that "the success of the ECB and the way they use the funds depend a lot on the fiscal actions that different governments are taking in the eurozone."
It is not only important to make sure that sufficient funds are available, but that the funds could quickly reach the people on the street, the households and businesses that are being affected, he stressed.
