Yves Bonzon (Julius Baer) | If the job losses are not quickly recouped, it must be expected that individuals will use their savings to support their consumption levels within a context of reduced incomes. This is a fundamentally different situation from the 2008 crisis when households (and companies, for that matter) had increased their savings sharply to compensate for the negative wealth shock resulting from the real estate and financial crisis. 

The European Commission has been asked to set up a 2 billion euros reconstruction fund to assist the countries and sectors most affected by the Covid-19. The fund would operate, at least partly, on the basis of grants and subsidies rather than loans to avoid excessive leverage by any of the member states. This instrument should be financed by issuing long-term bonds guaranteed by the EU budget. The EC points out that this type of bond is not the same as the “coronabonds” demanded by some countries at the start of the pandemic.

Adrià Morrón Salmerón (Caixabank Research) | The measures necessary to combat the COVID-19 outbreak will generate a significant increase in public debt in the world’s major economies, including in the euro area.The sustainability of euro-area debt is not in question, but the environment is demanding and places the ECB in a key position. A swift and sustained recovery in economic activity is also essential, which in turn requires a coordinated economic policy response.