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EU-ECONOMY-BUDGET
Eurogroup mulls budget measures to stem virus impact
BRUSSELS, March 5, 2020 (BSS/AFP) – Eurozone countries are ready to employ exceptional budget measures to shield the bloc’s economy from effects of the coronavirus, Eurogroup president Mario Centeno said Wednesday.
Major central banks, including the US Federal Reserve, have cut key lending rates to shore up financial markets.
But observers note that the crisis caused by the COVID-19 disease requires measures aimed at ensuring that small companies for example are able to survive what could become a months-long ordeal.
“We will coordinate our responses and stand ready to use all appropriate policy tools to achieve strong, sustainable growth,” Centeno said following a conference call with eurozone finance and economy ministers.
“This includes fiscal measures – where appropriate, as they may be needed to support growth,” added the Eurogroup head, who is also Portugal’s finance minister.
He underscored that the eurozone’s set of fiscal rules “provides for flexibility to cater for ‘unusual events outside the control of government’.”
That provision “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 noted.
All European Union members are bound by a pact to maintain public deficits of no more than three percent of their gross domestic product, and national debt of no more than 60 percent of GDP.
Several countries, including eurozone heavyweights Germany and France have breached the pact’s terms on other occasions however.
Centeno said Wednesday that “to be specific, in the EU rules allow for “a temporary deviation from the adjustment path, while preserving fiscal sustainability.”
That suggests countries could loosen their purse strings to support economic activity.
“No efforts will be spared … to shield our economies from further damage,” he said.
In addition to the Fed’s 50-basis point rate cut, the World Bank has unveiled an emergency plan worth $12 billion to protect economies from damage from the virus, which has killed more than 3,200 people so far.
The Organization for Economic Cooperation and Development on Monday urged governments to “act swiftly and forcefully” to overcome the outbreak and take measures to protect the incomes of vulnerable social groups and businesses.
Governments could help by providing unemployment insurance for workers placed on unpaid leave and by covering virus-related health costs for all.
BSS/AFP/MMA/0925HRS