Corona: A European Safety Net for the Fiscal Response

Efforts to contain and mitigate the Coronavirus rightly focus on health policy. But Europe is also at the cusp of an unprecedented economic situation: a standstill of many if not most European economies, potentially for a long period of time. In order to avoid permanent scars from the economic impact, fiscal policy will be key. Lucas Guttenberg and Johannes Hemker argue that national governments will have to provide a massive stimulus and that Europe will need to build a safety net so that member states will not be subject 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 its tools; and a number of flanking measures to underscore member states’ commitments. 

Image: CC JC Gellidon; Source: Unsplash