Lawmakers are therefore calling for an exceptional use of the ESM, which Giegold said “should not be tied to any new austerity measures”
Euro zone finance ministers will discuss on Monday the possible use of an EU emergency fund worth more than 400 billion euros ($447.6 billion) to tackle the economic crisis caused by the coronavirus outbreak, officials said.
The talks will be held amid calls from EU lawmakers to allow an exceptional use of the European Stability Mechanism (ESM) to tackle the unprecedented health and economic crisis.
The financial firepower of the ESM, the most powerful EU rescue fund, could provide the largest fiscal boost so far pledged at EU level. But such a move is still seen by many as potentially premature and hard to agree upon.
Officials admitted that extraordinary options were being considered given the exceptional circumstances, with both the 27-country EU and 19-member euro zone economies expected to tip into recession this year.
The fund was designed to help countries which lost market access, but that is not a problem at the moment as yields are still relatively low. But the ESM could help boost confidence, one euro zone official told Reuters, adding that how that could happen was under discussion.
"European governments should commit to give access to the precautionary credit lines of the European Stability Mechanism for euro countries that are under pressure on capital markets due to the economic effects of the corona crisis," said Sven Giegold, a German lawmaker who leads on financial matters for the Greens grouping in the European Parliament.
The ESM, which played a crucial role in rescuing euro zone states in 2010-2012 during the debt crisis, currently has a lending capacity of 410 billion euros. But access to its resources is linked to strict fiscal conditions, which would make the fund of no use under the current crisis.
Lawmakers are therefore calling for an exceptional use of the ESM, which Giegold said "should not be tied to any new austerity measures".
"The potential offered by the European Stability Mechanism must be used through a mandatory credit line to finance a common investment instrument," the EU Parliament's socialist grouping, the second-largest in the parliament, said in a statement on Monday.
But Markus Ferber, the coordinator on financial affairs of the center-right grouping, the biggest in the EU Parliament, struck a cautious tone.
"The ESM is a crisis management tool and if we open up the ESM funds this could also send a signal of imminent doom to the markets," he said.
He said that ESM precautionary credit lines would need the approval of national parliaments, including the German Bundestag which has in the past been very cautious in unblocking these funds.
"I would be surprised if we saw such a step this soon," Ferber told Reuters.
At their videoconference on Monday, EU finance ministers are also expected to discuss a package of financial measures proposed by the EU Commission on Friday.
Under the package, Brussels offered to redirect 37 billion euros of EU funds to sectors in need, to allow states to run bigger budget deficits and to guarantee up to 8 billion euros for cheap loans to smaller firms.
These measures need to be approved by governments and EU lawmakers.
National governments have also pledged an array of national support measures. Berlin promised half a trillion euros in guarantees for German business, while Italy, the country most affected so far, has planned measures for crisis-hit sectors worth 25 billion euros and pledged to go further.