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.
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.