European Central Bank President Christine Lagarde followed through on her pledge to counter the economic shock of the coronavirus outbreak with a stimulus package that included more bond purchases and loans for banks -- but no interest-rate cut.

The move reflects mounting concern as the disease disrupts tourism, business travel and global supply chains, giving Lagarde a major test just over four months into the job. Only two days ago, she told European Union leaders in a conference call that they risk a 2008-style crisis if they don’t come up with coordinated action.

In response, the Governing Council took the following decisions:

- Additional long-term loans to provide immediate liquidity
- More favorable terms on its targeted loan program, known as TLTRO
- An extra 120 billion euros ($135 billion) of asset purchases focused on the private sector
- The decision was complemented with temporary measures by the ECB’s supervisory arm to ease capital demands for banks

European stocks extended declines after the announcement, with the Stoxx Europe 600 Index down 7.8% as of 2:02 p.m. in Frankfurt. The euro fluctuated between gains and losses before falling 0.4% against the dollar as of 2:02 p.m. in Frankfurt. The yield on Italy’s 10-year government bonds soared as much as 34 basis points.

Lagarde is likely to use her 2:30 p.m. press conference to warn that governments must also step up. The ECB’s action is notably more nuanced than its central-bank peers, which have led the economic response to the outbreak with sizable emergency rate cuts.

That reflects the limited ammunition after years of massive stimulus under her predecessor, Mario Draghi. The institution already holds about a quarter of the region’s outstanding government debt, while its negative rates risk damaging the banking system and eroding financial stability.

In contrast, the Federal Reserve and the Bank of Canada were able to slash rates by half a percentage point last week. The Bank of England cut its key rate by the same magnitude on Wednesday, freed up cash at lenders, and introduced a new program to provide easy and cheap credit. It acted in concert with the government, which unveiled 30 billion pounds ($39 billion) of fiscal stimulus the same day.

Yet with the euro-area economy already stuck in a manufacturing recession and the virus now hitting the services sector -- President Donald Trump has suspended travel to the U.S. from Europe -- the 25-member Governing Council decided they had to do something.

The increase in quantitative easing will pump liquidity into the financial system, and the ECB signaled that purchases could be skewed toward corporate debt “support favourable financing conditions for the real economy in times of heightened uncertainty.”

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