In the wake of the global Corona crisis, numerous European countries have been mired in recession. In order to cushion the economic consequences more effectively, leading economists, including Bonn-based economist Moritz Kuhn, are calling for a common European approach to coping with the economic consequences of the Corona crisis.
In an open letter published on the policy analysis portal VoxEU, the economists propose various measures to be recommended across Europe and free of national interests. According to the authors, the important factor is to help households hit harder by the crisis – for instance, by providing short-term transfer payments to those lacking childcare. The economists further advise to hold off on a structural change as demanded by climate policy. Until the situation stabilizes, it would make sense to tackle this issue – otherwise, a far deeper recession would be imminent. Political uncertainties should be reduced by means of clear communication and by informing the public at an early stage about the political rules that will apply to society.
Learning from the European community
“The key is to continue strengthening international cooperation, to exchange information within the community of states and to identify best practices that can be learned from. In this way, populist currents can be prevented,” explains Moritz Kuhn, Professor of Economics at the University of Bonn and member of the Cluster of Excellence ECONtribute. The economists can imagine an independent scientific economic committee to assist in this process. This could evaluate and coordinate policy measures in the various regions of Europe, draw up specific strategic development strategies and provide the responsible national ministries with economic policy ideas for their regions.
Resuming multilateral trade relations
The current crisis has clearly shown how the world economy has grown together into a large network of trade relations. It would be imperative to resume these commercial ties as quickly as possible and to take advantage of the low intra-European trade restrictions. Stimulus measures would be necessary to revive the economies, the report added. With interest rates currently low, the economists recommend European governments with financially stronger budgets to ” invest” in countries with weaker finances while avoiding triggering unstable debt dynamics. This, they argue, would allow for a quicker end to the recession sparked by the Corona crisis. The economists conclude by arguing for a larger fund than the €750 billion provided by the EU to avert potential debt crises and give recipient countries more say in how the funds are spent, rather than tying the funds to specific industrial policies with long-term goals.