Frankfurt (AFP)

After its series of exceptional measures in response to the coronavirus pandemic, the European Central Bank (ECB) is expected to say it is ready to go further on Thursday, while urging governments to deliver a joint response.

Very virulent in March faced with the limited action of the States, the president of the institute Christine Lagarde again warned the European leaders, last week, against the risk "to act too little, too late", while the eurozone could see its GDP fall by 15% this year.

But in the absence of a European agreement on budgetary solidarity mechanisms, "it is again the ECB which must carry out the essential of economic policy to fight against the recessionary effects of the crisis", declared to AFP Eric Dor, research director at the Institute of Scientific Economy and Management (IESEG).

From 12:30 GMT, during a virtual press conference, Ms. Lagarde should hammer that the Frankfurt institution is "determined to increase the size of its interventions, if necessary, to continue to stabilize the public and private debt markets ", adds the expert.

It is first, for the ECB, to support the measures deployed by governments to help households and businesses, which will create a mountain of public debt estimated at 1,000 billion euros just for Germany, France , Italy and Spain.

- Size of the bazooka -

However "as long as the sharing of risks" between European states is "limited", tensions "will persist" on loans issued by countries with fragile finances, like Italy, underlines the bank Goldman Sachs.

Thursday, the ECB "will probably discuss an extension of the emergency purchasing program (PEPP)", therefore believes Fritzi Köhler-Geib, chief economist of the bank KfW: drawn on March 18, this unprecedented bazooka already plans to spend 750 billion euros in public and private debt by the end of the year.

Goldman Sachs expects a volume increase "of 500 billion euros", and even expects a decision this week.

Other economists are betting more on June, when the ECB will have new economic forecasts to decide.

The ECB could also choose to increase monthly debt purchases as part of its quantitative easing (QE) program conducted since 2015, beyond the 120 billion already added in March, predicts Mr. Dor.

While the institution has just accepted degraded bonds in the "speculative" category, commonly called "rotten" (junk), as bank guarantees, one option would be to integrate these securities into debt repurchase programs, which remains prohibited this day. Unless the ECB lifts this legal barrier on its own.

- Stimulate loans -

Lagarde is also expected to explain how the ECB will conduct its bond buybacks, now that it has blown the 33% limit on the stock of debt held for a given country, in a resounding decision on March 26.

It is however implausible, in the eyes of economists, that the institute lowers its already negative credit rate to -0.5%, which amounts to puncturing banks on the liquidity they entrust to the ECB instead of distribute in the form of credits.

To relieve financial institutions, and especially "encourage them to lend", the ECB should instead raise the share of these funds exempt from the credit rate, according to Dor.

Another gesture towards the banks could consist in making even more favorable the long term loans (known as TLTRO) which the ECB grants to them, provided that they in turn support the SMEs weakened by the crisis.

© 2020 AFP