By Catarina Demony and Sergio Goncalves
LISBON (Reuters) – There will be “no limits” to the euro zone’s response to the rapidly spreading coronavirus outbreak, Eurogroup chief Mario Centeno said on Monday.
Bank of Portugal governor Carlos Costa earlier called for a common and wide-ranging response by Europe to complement the ECB’s bond-buying scheme, and flexibility on fiscal discipline and state aid offered by the European Commission.
“The European response will have no limits and will show much solidarity,” Centeno, who is Portugal’s finance minister, told reporters in Lisbon when asked if he agreed with the issue of common “coronabonds” to prevent a potential new sovereign debt crisis, as proposed by Costa.
With economic activity curtailed across Europe, coronavirus infection numbers spiking and markets gripped by volatility, the ECB on Thursday expanded its bond-buying program for 2020 by 750 billion euros to 1.1 trillion euros.
The euro zone debt crisis at the start of the last decade, which put the common currency area’s survival at risk, kicked off with massive sell-offs in Greek and then Portuguese debt.
Investors saw the two countries at the time as the weakest links due to high indebtedness and weak economic prospects.
Both, especially Portugal, have since returned to growth and put their public finances on a healthier footing, but they still have some of the highest debt burdens in Europe.
Centeno said that the ECB and the European Commission had already put forward a set of “very significant” measures to fight the impact of the coronavirus outbreak on the economy, adding that other measures were being worked on and would be announced on a weekly basis.
Centeno is credited with devising a way to reverse many of the austerity policies of Portugal’s previous administration while at the same time delivering the lowest budget deficit in 45 years of democracy.
However, he said Portugal’s economy faces “tremendous challenges” this year as it reacts to the coronavirus crisis.
“It is a difficult time,” he said.
Portugal, which declared a state of emergency on Wednesday, has reported 2,060 cases of the virus and 23 deaths, far below the tens of thousands of cases in Italy and Spain, the two worst-hit European countries.
(Reporting by Catarina Demony and Sergio Goncalves; Editing by Catherine Evans, Nick Macfie and Alexander Smith)