ECB’s de Guindos: Coronabonds Not The Most Effective Solution

30 March, 2020

By David Barwick - MADRID (EconoStream) – Bonds issued jointly by European governments are not the most effective source of protection from the economic impact of the coronavirus pandemic, European Central Bank Vice President Luis de Guindos said in a radio interview on Monday. Speaking to Spain’s Cadena Copa, de Guindos said that so-called coronabonds, although he favored them, were “neither the sole instrument of defense nor, certainly, the most powerful.” The latter distinction belonged rather to the ECB, he asserted, where monetary authorities were "already doing everything necessary," including the generous provision of liquidity to banks and the large-scale purchase of bonds. “The ECB is trying to prevent a widening of risk premia and to keep under control the financing costs of the various governments so that there is no increase in financial pressure,” he said. “We will do everything possible so as to keep the euro together and the financing of the Eurozone economies the best possible.” From the perspective of the economy of Spain, which has been particularly hard hit by the pandemic, the ECB is in effect the “principal financial defense,” he affirmed. “If we did not have an ECB acting in the interest of the whole of the Eurozone, Spanish financing costs would have shot up,” he said. The Spanish economy was facing a GDP decline of two points for each month of lockdown, de Guindos said, predicting a “very profound recession.” “We must try to keep as much of the business fabric alive as possible so that economic activity can bounce back after the crisis,” he said.