Wendy Carlin's picture
Affiliation: 
University College London
Credentials: 
Professor of economics

Voting history

The Eurozone COVID-19 Crisis: EU Policy Options

Question 2: What is the best mechanism to pay for economic support provided by and to EU member states to combat the COVID-19 crisis?

Answer:
Expanded EU budget (with possible borrowing at the EU level)
Confidence level:
Not confident

Question 1: What is the total size of funding that you would advocate at the EU level in support of its members to weather the COVID-19 crisis this year?

 

 

Answer:
5-10% of GDP
Confidence level:
Confident
Comment:
The worst hit economies have provided too little (national) discretionary fiscal stimulus. Italy is in the worst position (see the IMF Fiscal Monitor on the balance between very small fiscal stimulus and much larger loans and guarantees). This combination is much too little to fill the output gap. The danger if substantial EU funding is not provided is of long-term and very costly scarring effects; and in the shorter term, of a possible sovereign debt crisis threatening the future of the Eurozone.

Covid-19: Economic Policy Response

Question 3: Which would be the maximal public debt you would be willing to tolerate if used effectively (as in your answers to 1 and 2 above) to support an economic recovery?

Answer:
>140% of GDP
Confidence level:
Confident
Comment:
This is a situation for which the use of the public debt as a shock absorber is appropriate, and the interest burden will be limited by the very low interest rate on public debt. If stringent measures to control the spread of the virus are implemented (a big 'if' as of now), then combined with a coherent package of measures to 'hold' economic relationships in place, the recession will be V-shaped and longer term economic damage will be limited.

Question 2: Which of the following would have the second greatest impact in mitigating the economic effects of the coronavirus economic crisis in the UK?

Answer:
Making unemployment benefits more generous, streamlined, or comprehensive
Confidence level:
Confident
Comment:
Given the support for employees (and their employers) in the Question 1, this will help fill the income gap for those with more precarious employment, allowing people to pay their bills and buy essentials.

Question 1: Which of the following would have the greatest impact in mitigating the economic effects of the coronavirus economic crisis?

Answer:
Government transfers to and bailouts of businesses
Confidence level:
Confident
Comment:
I interpret this to include the government's announced retention pay scheme - paying 80% of an employee's previous wage up to a cap. This preserves the employment relationship and is likely to permit a rapid return to normal levels of activity once the pandemic is over.

Pages