March 23, 2020 / 12:40 PM / in 7 days

Euro zone to discuss bailout fund use in coronavirus fight on Tuesday

BRUSSELS (Reuters) - Euro zone finance ministers will discuss European Commission proposals to make use of the bloc’s bailout fund to fight the economic impact of the coronavirus pandemic in a teleconference on Tuesday evening, the Commission said.

The Commission was asked by the finance ministers, the European Stability Mechanism (ESM) fund itself and the European Central Bank to come up with an instrument involving the fund, which has 410 billion euros ($438 billion) of unused lending power.

The ESM’s funds are too small to cover the needs of all euro zone countries in the unprecedented economic challenge posed by the health crisis, so its use will be mainly to shore up market confidence that governments will have enough cash if needed.

To achieve that, the EU executive wants to come up with an ESM tool that could also unlock unlimited ECB sovereign bond purchases through the Outright Monetary Transactions program (OMT), if needed.

EU finance ministers will hold the teleconference at 1730 GMT on Tuesday.

At 1400 GMT on Monday they will hold a separate call to formally endorse a Commission proposal to suspend EU limits on government borrowing during the pandemic, a move EU institutions agreed on on March 5.

Reporting by Jan Strupczewski; Editing by Hugh Lawson

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