Whilst, on the monetary side, it is sufficient for the main central banks to intervene, on the fiscal side all countries might provide support measures that are quantitatively and qualitatively strong enough to ensure recovery when the containment ends. The way the required transfers from governments to their private sectors are financed, in essence the chosen mix of tax increases, borrowing from private savings and monetisation, will play a determining role on the recovery capacity of different countries and regions.
To date, there are three groups of countries. The United States and most Anglo- Saxon countries plus Germany have mobilised the required amounts of budgetary support. A second group, including France, Spain, Italy and the Netherlands, is far from having mobilised the necessary amounts. Finally, a third group, the emerging countries, excluding China, have barely begun to mobilise the required budgetary resources and, above all, are facing considerable difficulty in borrowing or printing the required sums. If the situation does not change, financial assets in the above countries will show considerable performance differentials in the coming months and years. We reiterate our recommendation to give preference to countries that are able to take on debt and print the currency in which they do so.