EU and COVID-19 Economic Crisis: Financial Times

The European Central Bank plans to expand asset purchases by €750 billion over the next nine months, aimed at preventing a profound depression. Such a plan boosted the bond market in Europe, leading to decreased finance costs of EU member governments. Even though the ECB’s monetary interventions can partly alleviate the downward pressure on the economy, deeply divided national leaders focus on their domestic crisis and lack effective coordination policies. Populism has cemented Europe’s divisions, with the north cautious about helping the south. Nations like Spain and Italy resent Germany’s initial ban on the export of medical masks to EU partners, while northern rich countries express concern about moral hazard, encouraging more reckless spending among poor members. Analysts urge fiscal actions – increased government spending and transfers – to support the ECB’s monetary policies in tackling the economic shutdown, even as most eurozone countries have incurred deficits during the last decade. Meanwhile, Germany and the Netherlands, long skeptical of Eurozone risk-sharing, oppose deeper fiscal integration. The Financial Times article concludes, “The lack of co-ordinated European action seemed all the more extraordinary because the eurozone has considerable crisis-fighting tools created during its brush with a break-up in 2012.” – YaleGlobal