Covid-19 is expected to severely damage the European economy in the coming quarters. The answer at the European level to this disruption has been strong on the monetary policy side, with the implementation of the temporary Pandemic Emergency Purchase Programme of €750bn and targeted longer-term refinancing operations, and at the single country level, with targeted fiscal measures.
At the EU institution level, we are at a crossroads: the next two weeks will be crucial to see if the political will to reinforce the Union will prevail in this emergency situation and what measures will be digestible by countries averse to any form of debt mutualisation or by worst hit countries averse to any conditionality on the emergency loans. Beyond the political debate, it is unlikely we will see the issuance of corona bonds in the short term as even in case of political agreement, the devil will be in the technicalities of the implementation.
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