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This week the Dutch government blocked a proposal to activate a special credit line for countries who need financial support to fight the Covid19 crisis. But the logic behind the Dutch position is backward-looking and lacks diplomatic tact and political leadership.
Europe needs helicopter money to cope with the severe upcoming recession while avoiding a massive unsustainable debt burden. As soon as the economic recovery phase starts, the ECB should boost consumption in a fair way by sending money directly to all citizens.
The ECB launched a massive 750 billion euro plan to cope with the Coronavirus crisis. But these measures will only work if national governments spend as much as is necessary and outline an ambitious plan to tackle the recession.
The Eurogroup confirmed the highly needed suspension of fiscal constraints on Eurozone governments. But allowing countries to spend more does not mean all of them can afford to spend more.
By refusing to affirm the ECB’s willingness to “close spreads” on the Italian bonds market, Christine Lagarde’s mistakenly caused major indignation among citizens, politicians, and financial markets. But while Lagarde’s ambiguous comments were devastating, they mostly reveal the Eurozone’s flawed architecture.
There is little point in slowing down the contagion by forcing the economy to accelerate. Instead of blunt stimulus measures, the ECB must respond to the Coronavirus by launching targeted support for SMEs.