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How Europe Should Cope with the Economic Fallout from COVID-19

April 3, 2020

Antonio Garcia Pascual, Visiting Scholar, Johns Hopkins SAIS
Matthias Matthijs, Associate Professor of International Political Economy
Moderated by Pravin Krishna, Chung Ju Yung Distinguished Professor of International Economics and Business
Johns Hopkins SAIS experts hosted a webinar to address the European Union’s economic strategy to combating the coronavirus pandemic. 
Visiting Scholar Antonio Pascal discussed his proposal of a practical, speedy and politically feasible financial support mechanism that would achieve the objective of reinforcing debt sustainability using a combination of European Stability Mechanism (ESM) funds, low ESM funding-rates and light ESM conditionality along with ECB action. His proposition highlighted that whatever the European solution may be, it requires an emergency provision of funds immediately. Coming up with this ESM sizeable loan at a sufficiently low interest rate, low maturities and with ECB supporting these endeavors will make public debt sustainable and fiscally manageable. 
Professor of International Political Economy Matthias Matthijs discussed his perspective on the state of the current European financial response by showcasing that the effort for solidarity led by Spain, Italy and France comes at the heels of a long lasting euro crisis where financial instruments were created. He explained that the main program so far has stopped the bleeding for Spain and Italy with crisis tools such as the Pandemic Emergency Purchase Program (PEPP) and the Outright Monetary Transactions (OMT). Countries such as Germany and the Netherlands believe this has so far solved the problem, while a Southern Europe coalition calls for ‘Corona bonds’ to avoid having GDPs collapsing with high debt ratios.