(...) The ECB does not tolerate fragmentation, yet the pandemic is making the eurozone more fragmented than ever because fiscal responses and economic and social damage are asymmetric. Italy is at the forefront as one of the hardest-hit countries, with less fiscal space and high public debt. How will Italy’s recovery out of the COVID-19 crisis be helped by the ECB, and by being a member of the euro?
This pandemic is a severe shock for all countries: it is a truly global shock. Italy's GDP projections are a little bit below the average euro area baseline scenario: the Banca d’Italia sees GDP contracting by 9.2% in Italy this year compared to a euro area average of -8.7%. But most importantly, the whole euro area is going through a big recession this year. And not only is the entire euro area severely affected, but being part of the euro area also provides a lot of benefits in terms of responding to the shock. We had a pandemic, which is a common shock, and a common response from the ECB as the common central bank. This is very important since it is unlikely that individually all countries could have responded on the same scale. When this big shock arrived in the middle of March, the ECB responded decisively to stabilise financial markets because there was a huge dislocation. The ECB showed it could be an anchor of stability and prevent self-fulfilling dynamics that otherwise could have escalated. In this respect, the ECB’s pandemic emergency purchase programme (PEPP) has so far played two roles in the pandemic: first, it provides a market stabilisation tool, and second, it helps to make sure that the tightening of financial conditions was offset. (...)
This pandemic is a severe shock for all countries: it is a truly global shock. Italy's GDP projections are a little bit below the average euro area baseline scenario: the Banca d’Italia sees GDP contracting by 9.2% in Italy this year compared to a euro area average of -8.7%. But most importantly, the whole euro area is going through a big recession this year. And not only is the entire euro area severely affected, but being part of the euro area also provides a lot of benefits in terms of responding to the shock. We had a pandemic, which is a common shock, and a common response from the ECB as the common central bank. This is very important since it is unlikely that individually all countries could have responded on the same scale. When this big shock arrived in the middle of March, the ECB responded decisively to stabilise financial markets because there was a huge dislocation. The ECB showed it could be an anchor of stability and prevent self-fulfilling dynamics that otherwise could have escalated. In this respect, the ECB’s pandemic emergency purchase programme (PEPP) has so far played two roles in the pandemic: first, it provides a market stabilisation tool, and second, it helps to make sure that the tightening of financial conditions was offset. (...)
Post
Nessun commento:
Posta un commento