FRANKFURT (Reuters) - Europe must provide liquidity to companies hit by the coronavirus outbreak to avoid a banking crisis, a group of German economists said on Friday.
The warning came as Germany's top bankers headed to Berlin to confer with the finance minister on possible measures.
The economists, affiliated with the Leibniz Institute for Financial Research SAFE, said a liquidity crunch in the economy could result in a new banking crisis.
"Only coordinated fiscal policy measures have the potential to reduce the default risks of banks and thus stabilize the financial system," they wrote.
German finance minister Olaf Scholz is convening with the chief executives of Deutsche Bank (DE:DBKGn), Commerzbank (DE:CBKG), and other senior bankers and regulators to discuss measures on Friday afternoon.
European companies grappling with the impact of coronavirus could soon qualify for multi-million-euro loans backed by the European Union and big banks in a scheme poised to get waved through in days, Reuters reported.
"Looming insolvency of firms increasingly stress the banks as creditors," the economists said.
Shares of Europe's leading banks have been hit hard as the virus spreads, with Deutsche down 18% on Thursday alone and Commerzbank down even more in a broader market sell-off.