ECB ramps up stimulus for virus-hit Europe, doesn't prescribe rate cut

The outbreak of coronavirus has led to a nationwide lockdown in Italy as the government is seeking to slow down its spread.

The European Central Bank (ECB) rolled out yet another stimulus package on Thursday to help fight off the coronavirus pandemic but kept some of its powder dry, putting the onus firmly on governments and disappointing investors who expected more.
Warning Europe faced a "major shock" that would disrupt life, ECB chief Christine Lagarde offered a range of liquidity facilities aimed at businesses, which are likely to be hit hard by coronavirus, in the hope of mitigating a crisis that could plunge the 19-country eurozone into recession.
But unlike its US and UK counterparts, the ECB held back on cutting rates and instead pointed the finger at eurozone governments, who have been slow in ramping up spending.
"I'll tell you what I'm worried about: it would be the complacency and the slow motion process that would be demonstrated by the fiscal authorities of the euro area in particular," Lagarde told a news conference. "I don't think that anybody should expect any central bank to be the line of first response. It's fiscal first and foremost."
As part of its measures, the ECB will provide banks with loans at a rate as low as minus-0.75 per cent, below the minus-0.5 per cent deposit rate and so essentially a rebate, and increase bond purchases by 120 billion euros this year, with a focus on corporate debt.
UK spending too
Meanwhile, Britain's Conservative government is on course to raise public spending to its highest since the mid-1980s, after finance minister Rishi Sunak unveiled plans that go far beyond combating coronavirus, the Institute for Fiscal Studies said on Thursday.
Sunak's first budget, which he presented to parliament on Wednesday, envisages annual spending rising by 9 per cent or £76 billion ($96 billion) over the next four years, mostly funded by higher borrowing, to about 41 per cent of national economic output.
"That is above pre-crisis levels, above the size of the state over which the last Labour government was presiding, bigger than at any time since the mid 1980s, other than when the economy shrank during the crisis," IFS director Paul Johnson said.
Britain's Office for Budget Responsibility forecast the country's budget deficit over the next 5 years would average around 2.5 per cent of economic output, while total debt would be about 75 per cent of GDP - mid-table by international standards.