It is no easy task to prevent an induced economic coma from slipping control and turning into a secondary financial crisis. No major country has ever tried to do such a thing before.

The longer the sudden stop continues in Europe and North America, the greater the risk that we slide into a self-feeding credit and liquidity crisis. The economic and financial storms would then reinforce each other to overwhelm the defensive system.

Crisis veterans are watching the three month dollar Libor rate (not equity markets). This has jumped 60 basis points since mid-March despite a shower of liquidity and unprecedented emergency action by the Federal Reserve. Libor matters: some $9 trillion of contracts worldwide are priced off the benchmark.

Banks were the villains of the 2008 crisis. This time they are the designated saviours, deemed strong enough to hold the line against Covid-19. They are to be the conduit for disaster relief, the backstop lenders for drowning firms and households.

Regulators have eased capital rules to free up $5 trillion of loans worldwide. The European Central Bank has waived its capital rules, freeing up €120bn in bank equity base. "Rainy day" buffers are being activated. Excellent. But in doing so they are leaving the banks naked, should the economic damage from Covid-19 drag on, and tumbling earnings and soaring bad debts eat into their viability. Moody’s has already placed the entire European banking system on negative alert.

Harvard professor Ignazio Angeloni, an ex-member of the ECB’s supervisory board, says European banks could “cease to function or fail on a massive scale” as losses pile up. Governments will have to start taking them into “public ownership” to prevent a systemic credit crunch . “While free market diehards may turn up their nose, this is probably a lesser evil,” he says.

It brings into play the infamous sovereign/bank "doom loop" from the eurozone debt crisis. The weak states of Italy, Portugal, and Spain (leaving aside the perennial tragedy of Greece), are left to rescue their own banks.

EU leaders pledged long ago to end this doom loop but never delivered. These Club Med states are also the ones suffering the biggest macroeconomic shock: they have lost a year’s tourist season; and they are least able to afford the eye-watering costs of nursing their entire private economy through the pandemic.

The LSE’s Lucrezia Reichlin says Germany is spending towards 5pc of GDP in direct fiscal support. Italy dare not risk much more than 1pc. Club Med debt ratios are likely to jump 20 percentage points of GDP (to 155pc in Italy’s case).

Painfully slow recovery and post-crisis hysteresis will be slow torture for their banks. The risk is that the sovereigns and the banks will drag each other down in a horrible spiral. That is why the proposal for (ESM) bail-out loans – piling more debt on the debtors – is a Faustian Pact that resolves nothing.

Mr Angeloni said the EU has to “block this doom scenario” by recapitalising banks on the joint EU credit card. But it is not just Europe. Banks may not be strong enough to fulfil their new role as saviours in any part of the world, including the US, China, and Japan.

None of the major lending systems were ever stress-tested for an economic deep freeze lasting months. The Federal Reserve’s “severely adverse scenario” for 2020 assumed a worst case rise in unemployment to 10pc over 18 months. This has already been blown apart. The US has lost 10 million jobs in two weeks.

The St Louis Fed warns that 47 million workers could be laid off in short order, pushing the unemployment rate to 32pc. Nothing like this was seen during the worst phase of the Great Depression in early 1933. It is outside the historical experience of all western democracies.