The European Central Financial institution (ECB) introduced Thursday that it’ll basically pay banks to lend cash as it really works to blunt a pointy financial decline fueled by the coronavirus pandemic. The ECB mentioned it’ll in sure cases enable business banks to borrow at a fee of minus 1 p.c as long as the cash is handed on to customers and companies. The change successfully permits banks to not pay again all the cash they borrow. ECB President Christine Lagarde warned throughout a press convention that the eurozone financial system might shrink by as a lot as an “unprecedented” 12 p.c this 12 months because the virus continues to ravage the continent.Amongst different measures the ECB is taking to blunt the pandemic’s financial fallout are boosting its purchases of presidency and company bonds, making it simpler for companies to get credit score and elevating the quantity of funds it’s allocating for asset purchases “by as much as necessary and for as long as needed.” “The euro area is facing an economic contraction of a magnitude and speed that are unprecedented in peacetime. Measures to contain the spread of the coronavirus, COVID-19, have largely halted economic activity in all the countries of the euro area and across the world,” Lagarde mentioned. “In particular, our measures are supporting liquidity conditions and helping to sustain the flow of credit to households and firms, especially small- and medium-sized enterprises, and to maintain favorable financing conditions for all sectors and jurisdictions.”The brand new strikes add to already introduced stimulus measures that embody $825 billion in bond purchases.The ECB final applied unfavorable rates of interest in 2014.