The new TLTRO “will support bank lending to those affected most by the spread of the coronavirus, in particular small and medium-sized enterprises,” it said.
That program works largely as a rate cut through the back door. The rate applied to long-term loans will be negative regardless of whether banks comply with lending goals, and can drop as low as -0.75%. That builds on an existing program, which previously subject banks to an incentive rate as low as the -0.5% deposit rate.
Euro-zone governments have started to wake up to the need for economic support. Italy, where a national lockdown has been imposed, is the hardest hit so far by the spread of the virus in Europe, and has said it’s ready to spend as much as 25 billion euros on stimulus.
Even in Germany -- which despite having the most fiscal firepower has been reluctant to spend -- Chancellor Angela Merkel said the government will do whatever is needed to limit the impact of the coronavirus. The administration is prepared to abandon its long-standing balanced-budget policy, according to people with direct knowledge of its economic policy.
--With assistance from Piotr Skolimowski, Jana Randow, Katerina Petroff, Daniel Schaefer, Alexander Pearson, Alexei Anishchuk, Catherine Bosley, Craig Stirling, Fergal O'Brien, Brian Swint, Zoe Schneeweiss, Lucy Meakin, William Horobin, Jeannette Neumann and David Goodman.
This article was provided by Bloomberg News.