The pandemic is ravaging the global economy. We have never seen such a steep downfall of the economy before, which leaves us in a difficult situation. There is no plan for this situation, we only learn and proceed along the way. Now, we need to control our financial stability and not slide into financial crisis, in which quantitative reasoning is of help.
The advantage of central banks in these times is that they were able to act fast and have succeeded in helping the banks. Therefore, the people felt the crisis more in other fields, such as the health sector. The outlook itself does not look as bad as we expected in the early months of the pandemic, however, the conditions are changing fast.
The crucial difference between this crisis and the crisis from 2009 is that this time the financial sector stands at the side of a solution, rather than the problem. The task is to support the growth and get back to median inflation rates responsibly, even vis a vis the private banking. Before the COVID-19 pandemic, we had very low-risk rates, however, now we have banked with very little margins and big uncertainty on the risk profile for the next months, or years to come, which we need to take into account. The business model is very dependent on the regulations introduced.
The debt that we are taking upon ourselves as a community is an unprecedented step in our European history. The recovery package is at large constituted by grants, which will have to be repaid in the end in the form of a contribution to the EU budget. All in all, the architecture of the monetary union is not completed yet and the fiscal policy is a crucial element in this policy mix.
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