March 20, 2020 / 9:55 AM / 13 days ago

UPDATE 1-EU open to 'coronabonds' to cushion economic fallout - von der Leyen

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BERLIN, March 20 (Reuters) - The European Commission is ready to consider backing common debt issuance in the euro zone to help the bloc weather the massive economic impact of the coronavirus outbreak, its president said on Friday.

"We are looking at all instruments and whatever helps will be used," Ursula von der Leyen told German radio Deutschlandfunk. "This also applies to coronabonds - if they help and if they are correctly structured, they will be used."

The comments from the Commission president, a member of Chancellor Angela Merkel's conservatives in Germany, which has long resisted pooling debt with heavily indebted European Union members such as Italy, suggest consensus is now building for such a step.

Prime Minister Giuseppe Conte of Italy, which has lost more lives in the pandemic than any other country including China where it began, has called for special "coronavirus bonds", or a European guarantee fund, to help EU states finance health spending and economic rescue programmes.

Germany, the bloc's biggest economy, resisted common euro zone debt issuance at the height of the 2008 financial crisis that pushed the shared euro currency to the brink of collapse.

Asked about Conte's bonds proposal, Merkel said earlier this week that euro zone finance ministers were discussing measures to support their economies but no conclusions had been reached.

German Finance Minister Olaf Scholz has said member states with higher debt levels should have the fiscal leeway for stimulus packages.

Von der Leyen said: "The same thing applies to debt rules - we are loosening them so that states have every opportunity to use financial resources. We are looking at everything - everything that helps in this crisis will be used, because we'll support our economy without ifs or buts."

EU Economics Commissioner Paolo Gentiloni said on Friday that the European Stability Mechanism (ESM) - the euro zone's bailout fund, would be in the best position to issue coronabonds needed to fund emergency measures.

The bonds "are market operations and must be launched by financial structures. The most suitable is the ESM," Gentiloni told RAI Radio 1.

He added there was still no decision but "discussions must continue."

The idea of a coronabond issued by the ESM has the support of some European Central Bank policymakers as well, a source told Reuters on Thursday. (Reporting by Joseph Nasr and Michelle Martin; Editing by Hugh Lawson)

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