The risks of exiting too early the policy responses to the COVID-19 recession

Abstract

This policy brief warns about the risks of discontinuing the policy responses to the COVID-19 crisis by pursuing exit strategies too early and/or too sharply. It outlines a comprehensive strategy for limiting such risks globally and offers an in-depth discussion of the European situation. Due to fiscal rules written in a pre- COVID-19 era and excessive emphasis on controlling public debt ratios, the Euro Area could be left with long-lasting scars, so its situation requires special treatment. Therefore, we articulate some policy proposals designed to preserve and strengthen the recovery in the EMU.

Keywords

• Covid-19 pandemic
• Fiscal and monetary policy mix
• Regulatory policies
• Sovereign and corporate crises
• G20
• Euro area