Corona: A European Safety Net for the Fiscal Response

by Lucas Guttenberg, Deputy Director, & Johannes Hemker, Affiliate Policy Fellow
Hertie School, Jacques Delors Centre. Article originally published on the website of the Jacques Delors Centre, Berlin.

|   17/03/2020             |   Lucas Guttenberg   |   Johannes Hemker             |   Economics and finance

In order to avoid permanent scars from the economic impact of the Coronavirus in Europe, a determined fiscal response will be necessary. We argue that there should be a clear division of labor between Europe and national governments: the latter will have to provide stimulus with targeted measures, while Europe needs to build a safety net so that member states will not lose access to bond markets due to speculative attacks. This safety net should have three components: A commitment by member states to use ESM instruments without conditionality; a commitment by the ECB to use all of its tools; and a number of flanking measures to underscore member states’ commitments.