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Economics

Bienvenida respuesta europea a la pandemia

Apr 24, 2020 Sylvain Broyer

PARÍS – La pandemia de COVID-19 golpeó duramente a los estados miembros de la UE y continuará obligando al bloque a enfrentar significativos desafíos económicos. Sin embargo y hasta el momento, desde la perspectiva macroeconómica, la respuesta europea en términos de políticas ha sido alentadora, porque incluye fuertes incentivos para el crecimiento sostenible, la solidaridad y la estabilidad económica.

Los gobiernos europeos se han comprometido a implementar medidas fiscales sin precedentes en respuesta a la crisis y —algo igualmente importante— los mercados parecen haber considerado que estas medidas son apropiadas. Las recientes ofertas de deuda soberana de Portugal e Italia se fijaron a precios muy bajos y en gran medida fueron sobresuscriptas. Por toda Europa el rendimiento de los bonos soberanos fue similar al que tenían a fines de 2019. Aunque los diferenciales y los precios de las permutas de incumplimiento crediticio sobre la deuda de ciertos gobiernos europeos se han ampliado, están muy lejos de los niveles alcanzados en los shocks previos. En otras palabras, la fragmentación de los mercados financieros europeos está mucho más contenida que en 2009 o 2012.

Por otra parte, hay buenos motivos para creer que las políticas en respuesta a la COVID-19 funcionarán de manera diferente que las posteriores a la crisis financiera de 2008, aun cuando la recesión pueda ser más profunda esta vez. El pronóstico de S&P prevé que el PIB se contraerá el 6 % en Alemania, el 8 % en Francia y el 10 % en Italia este año, y que las proporciones de deuda a PIB se dispararán a consecuencia de la recesión y la respuesta fiscal sin precedentes.

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Toward a European Reconstruction Fund
Mario Hommes/DeFodi Images via Getty Images

Economics 7

Toward a European Reconstruction Fund

Guy Verhofstadt & Luis Garicano propose a post-pandemic entity through which the European Union could issue debt to finance recovery.

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Paul Daley Apr 27, 2020

Actually, post-mortems will probably conclude that the greatest virtues of Europe's response to this latest crisis was not so much that it was larger and quicker than in previous cases, but that it was not so large or so quick as the American response. Remember, the Americans and the Europeans were both reacting to self-inflicted wounds: decisions to lock down their economies in the face of a disease that ultimately proved to be far less lethal than they expected, but far more contagious than their lock-downs could handle. Antibody testing in California, New York, Germany and elsewhere has clearly indicated that the virus has spread 10 to 15 times more quickly than the official case count would indicate, despite the lock-downs. In fact, in New York, in particular, acquired immunity, rather than its lock-down, has probably been the major factor in slowing the spread of the disease.

In contrast to public health organizations, however, public financial organizations were primed to respond to a crisis because of their experience in 2008-09, their familiarity with the growing fragility of financial markets, and a growing indifference to the scale of public debts. So public financial authorities responded quickly, before the most critical features of the disease were even known. Americans, in particular, added $2.7 trillion to their federal debt on top of deficits that are already running above $1 trillion annually. Meanwhile, the Federal Reserve added several trillion dollars to its balance sheet over a matter of weeks.

In short, it appears that financial authorities in western countries ran laps around the public health authorities in responding to the coronavirus. Money was out before the public health strategy of lock downs had even been checked through random antibody tests. It now appears that the coronavirus is not very lethal; it also appears to be far more contagious than lockdowns can handle. That's all good to know. But it would have been far better if those facts had emerged before we all, Europeans as well as Americans, were on the hook for several trillion dollars in new debt.
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Kevin Newman Apr 24, 2020

Its a well-written piece and some of what you point out is broadly relevant

However the fact remains that absent a decisive - by this I mean several Trillion - intervention in the form of long-dated bonds, or else money-finance stimulus, co-ordinated at pan-EU level, there is no chance of a swift revival

The ECB stance to date - more Q E plus a few other treats - wont succeed as it is not directed at the micro-level which requires massive boosting

Equally the recent programs announced at EU level are insufficient as they are optional, not cash-based and dependent on demand / co-investment

Debt sustainability issues will become apparent once the embedded nature of the shock hits headline figures and trickles down causing a self-perpetuating cycle

We better all strap in as this is a long painful road back to "normality"
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Bienvenida respuesta europea a la pandemia

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