Europe is 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 of the Coronavirus in Europe, a determined fiscal response will be necessary.
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.
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