The European Central Bank (ECB) on Thursday launched 750 billion euro emergency bond purchase scheme in a bid to stop a pandemic-induced financial rout from shredding the euro zone’s economy.

ECB has also raised fresh concerns about the currency bloc’s viability.

With much of Europe in lockdown amid the coronavirus outbreak, economic activity has come to a near standstill and markets have been in a tailspin, foreshadowing a deep recession on par with the 2008 global financial crisis.

It has also raised questions about the euro zone’s cohesion at times of stress.

Under pressure to act to bring down borrowing costs for indebted, virus-stricken countries such as Italy, the ECB launched a new, dedicated bond-purchase scheme.

It has however brought its planned purchases for this year to 1.1 trillion euro with the newly agreed buys alone worth 6 per cent of the euro area’s GDP.

ECB President Christine Lagarde said after an emergency policy meeting on Wednesday that extraordinary times require extraordinary action.

“There are no limits to their commitment to the euro.

“We are determined to use the full potential of our tools, within our mandate,” Lagarde said.

According to ECB, the bond purchases will continue until the crisis phase of the epidemic is over and non-financial commercial paper will also be included for the first time among eligible assets.

Although global stocks continued to fall after the ECB’s move, the euro held broadly steady and bond yields in the bloc’s periphery tumbled, with Italy leading the way with a 90 basis point drop on its 10-year benchmark.

“Although it will still buy government bonds according to each country’s shareholding in the bank, the so-called capital key,’’ the ECB said, noting that it would be flexible and may deviate from this rule.

This was seen as a clear indication that it will not tolerate the surge in yield spreads between euro zone members seen in Italy and Greece in recent days.

Euro zone officials, who were critical of the ECB’s stimulus measures recently, rushed to the bank’s support this time, with French President Emmanuel Macron leading the way. (Reuters/NAN)