The health emergency triggered by the coronavirus is already an economic crisis, hitting a very fragile international economy already suffering from the unsolved imbalances inherited from the great recession. Although the prevailing analyses tend to consider the economic consequences of pandemics and related quarantines as short-term phenomena, this time is different: we must admit the case of much more intense and prolonged slowdowns.
At this stage, Italy represents a trench of health and economic emergency. Analogous problems, however, will reoccur on a more or less similar scale throughout Europe. In this scenario, an “anti-virus” plan that is up to this unprecedented turmoil becomes a matter of urgency. In the immediate term, a massive and rapid intervention by monetary and fiscal authorities is needed to control capital markets, provide liquidity in order to support private demand, and ensure solvency in the banking and production systems.
Further measures that shift tax burdens to higher incomes, profits and rents can help to reduce the iniquities fuelled by the crisis. Meanwhile, the central bank and governments must co-ordinate to prepare a huge public investment plan primarily in the health sector and more generally in areas where market failures occur: welfare, infrastructures, education, research, ecology. The plan must intervene not simply to support effective demand but also to counter possible “disorganisation” in the markets and bottlenecks on the supply side.
What is difficult in adopting such a plan promptly is that it would require centralised financing and co-ordinated action. As already pointed out in a previous appeal published by the FT, the European Union and the eurozone appear to be among the most deficient institutions from this point of view. It is no coincidence that once again the response of the European Central Bank, EU institutions and governments has so far been hampered by conflicts, slow, and completely inadequate. If egoism and ineptitude prevail also in the case of the coronavirus, it would be a shame even greater than the previous ones.
There must be no irrational or selfish constraints on appropriate economic policy action. If a Union really exists, it must give us a sign now. Otherwise, with or without Europe we will have to do whatever it takes to overcome the crisis.
Prof Emiliano Brancaccio
University of Sannio, Italy
Prof Riccardo Realfonzo
University of Sannio, Italy
Prof Mauro Gallegati
Università Politecnica delle Marche, Italy
Prof Antonella Stirati
Università Roma Tre, Italy
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