Christine Lagarde said Europe risks a major economic shock similar to the financial crisis unless leaders act urgently on the Coronavirus and indicated that the ECB will take steps as soon as this week.
"Without coordinated action, Europe will see a scenario that many of us are reminded of the 2008 financial crisis," the President of the European Central Bank told EU leaders in a conference call late Tuesday, adding that the shock is likely to be temporary, with the right response.
She also said ECB policymakers are looking at all the tools for their meeting this week, particularly those that provide "very cheap" financing and ensure that liquidity and credit don't dry up. She added that the measures can only succeed if governments also throw their weight also, while taking steps to ensure that banks continue to lend to companies in the affected areas.
Many economists expect the ECB to cut interest rates on Thursday and possibly expand its quantitative easing program. Lagarde's message in this call is a stern warning to the authorities to intensify their efforts to prevent the virus from dragging Europe into recession. Even before the virus spread, ECB officials have repeatedly called on governments to increase public spending as monetary policy reaches its limits.