To cushion the economic impact of the coronavirus crisis, the ECB, the European Commission, and the German government among others have announced far-reaching monetary and fiscal policy measures. The ECB intends to support the real economy with favourable credit lines for banks and an expansion of the bond purchase programme. In addition, capital requirements for banks are to be eased. The EU Commission has announced that it will give the member states room for manoeuvre through exemptions for state aid and flexibility in budgetary rules. The Commission has also announced a small investment package and medical cooperation.
The German government, represented by finance minister Scholz and economy minister Altmaier, initiated massive liquidity aid through the German promotional bank (KfW), an expansion of short-time work benefits, tax deferrals for companies and an expansion of guarantee programmes for companies. At a press conference on Wednesday, six leading German economists called for a similar far-reaching programme to counter the crisis promptly and decisively.
MEP Sven Giegold, financial and economic policy spokesperson of the Greens/EFA group commented:
“The governments of the euro countries are countering the economic effects of the Coronavirus at the national level with massive fiscal programmes. A gap remains at the European level. The Scholz-Altmaier proposals offer only a weak European response to the crisis. The Commission’s exemptions for member states’ deficit spending do not solve the problem of potential speculative attacks on individual member states. European governments should commit to give access to the precautionary credit lines of the European Stability Mechanism for euro countries that are under pressure on capital markets due to the economic effects of the corona crisis. Access to the ESM precautionary credit should not be tied to any neu austerity measures. A firm commitment to use the precautionary ESM credit lines would calm the capital markets and thus counter speculative attacks. At the same time, the European Investment Bank must help Italian companies in particular with direct credit lines. It is not enough to save German businesses and at the same time send Italian companies into bankruptcy.
The measures announced by the German Government are a strong signal to the markets to do everything possible to ensure the survival of companies and jobs. In addition to the liquidity measures, the federal government must also step up investment to stabilise the economy. The German Government must deliver on European solidarity. The proposals of Scholz and Altmaier do not provide an answer to the dilemma of weaker Euro countries which are at risk of losing the confidence of markets due to rising debt.
The lack of political action after the last crisis is becoming apparent. The Eurozone is not sufficiently crisis-proof. The fact that no real reform of the Eurozone has been undertaken is taking its toll. There is a lack of common debt instruments and common Eurozone decision-making. In the medium term, the Eurozone needs a common debt repayment fund combined with reforms across Europe.”