BRUSSELS, March 16 — The European Union could provide €28-40 billion (RM120.6-172.3 billion) immediately to support small and medium-sized companies hit by the effects of the coronavirus pandemic, the European Investment Bank said in a letter to EU finance ministers.

But such help would not be enough to calm financial markets, the letter said, calling for a “significant additional guarantee” from EU governments that the EIB could use to ensure open access to finance for small and medium-sized companies.

The letter, sent late on Sunday, said economic activity in Europe was shutting down as a result of government decisions to limit the spread of the virus and modify social behaviour.

“The resulting economic damage is immediate and widespread,” EIB President Werner Hoyer wrote in the letter, seen by Reuters.

“We need a strong European response to the Corona crisis. The economic and financial dynamics immediately ahead of us are approaching a tipping point. If Europe wants to prove its value in this situation, it needs to act jointly.”

EU finance ministers were holding a video conference on new ways to respond to the economic damage caused by the coronavirus epidemic at 1400 GMT and were due to discuss the role of the EIB in that task.

The re-prioritising and re-purposing of money already in the EIB pipeline and redirecting some funds now used as a guarantee for the EU-leveraged investment scheme EFSI would together generate 28 billion euros, the EIB said.

Another 12 billion would come from leveraging an additional 1.5 billion euros freed by optimising risk of the EU budget and the EIB balance sheet under the EFSI scheme, the bank said.

“Europe needs a ‘whatever it takes’ moment in the coronavirus response,” Hoyer wrote to the ministers, pointing to the welcome shown by economists to the German plan to provide unlimited guarantees for companies hit by the epidemic.

“It is different from bailout funds as it can help us get ahead of the problem to indeed avoid the need for bail-outs, calm markets and ensure that financial stability prevails,” the letter said.

“It would be an economic and political confidence-building measure to prevent insolvencies, instil confidence and ultimately help our European efforts to beat the virus,” Hoyer said in the letter. — Reuters