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Will ‘Helicopter Money’ and the ‘Big Bazooka’ Help Rescue Europe? Will ‘Helicopter Money’ and the ‘Big Bazooka’ Help Rescue Europe?
(10 days later)
Don’t worry about government deficits so much and start spending. Get ready to use the “big bazooka” by issuing eurobonds. Drop cash from the sky.Don’t worry about government deficits so much and start spending. Get ready to use the “big bazooka” by issuing eurobonds. Drop cash from the sky.
As Europe’s policymakers race to prop up the economy while the coronavirus rips through the continent, everything is on the table.As Europe’s policymakers race to prop up the economy while the coronavirus rips through the continent, everything is on the table.
“Extraordinary times require extraordinary action,” Christine Lagarde, the president of the European Central Bank, said on Twitter as she announced plans this week to overwhelm debt markets with cash to keep the borrowing costs of countries like Italy from spinning out of control.“Extraordinary times require extraordinary action,” Christine Lagarde, the president of the European Central Bank, said on Twitter as she announced plans this week to overwhelm debt markets with cash to keep the borrowing costs of countries like Italy from spinning out of control.
“There are no limits to our commitment to the euro,” she said.“There are no limits to our commitment to the euro,” she said.
But was the dramatic announcement enough?But was the dramatic announcement enough?
“The E.C.B.’s action yesterday was important,” but it may not be sufficient if the eurozone is facing perhaps a 10 percent drop in growth, said Mujtaba Rahman, who leads the Europe practice at the Eurasia Group, a consulting firm.“The E.C.B.’s action yesterday was important,” but it may not be sufficient if the eurozone is facing perhaps a 10 percent drop in growth, said Mujtaba Rahman, who leads the Europe practice at the Eurasia Group, a consulting firm.
“European Union leaders are not off the hook and will need to keep thinking creatively about collective measures they can take to help member states,” he added.“European Union leaders are not off the hook and will need to keep thinking creatively about collective measures they can take to help member states,” he added.
The 27 countries in the European Union have collectively deployed more than 200 billion euros (about $219 billion) to finance a raft of measures, like cutting taxes and extending unemployment benefits. That figure already seems set to grow.The 27 countries in the European Union have collectively deployed more than 200 billion euros (about $219 billion) to finance a raft of measures, like cutting taxes and extending unemployment benefits. That figure already seems set to grow.
The European Union has identified more than €70 billion in funding that it can quickly funnel to countries and companies that urgently need it. And the European Central Bank’s €750 billion bond-buying program will make it easier for even the worst-hit countries to borrow money.The European Union has identified more than €70 billion in funding that it can quickly funnel to countries and companies that urgently need it. And the European Central Bank’s €750 billion bond-buying program will make it easier for even the worst-hit countries to borrow money.
But as the pandemic accelerates through the continent, sending weakened economies toward recession, European policymakers still have some additional tools they can deploy.But as the pandemic accelerates through the continent, sending weakened economies toward recession, European policymakers still have some additional tools they can deploy.
allow more deficit spending and state aid for companiesallow more deficit spending and state aid for companies
To be helpful, the European Union and its institutions must first stop being unhelpful. This will mean waiving rules meant to ensure that countries don’t overspend and that governments don’t unfairly assist companies.To be helpful, the European Union and its institutions must first stop being unhelpful. This will mean waiving rules meant to ensure that countries don’t overspend and that governments don’t unfairly assist companies.
Stringent fiscal rules that set caps on the size of deficits European Union countries are allowed to run (3 percent of their annual economic output) will soon be out the window.Stringent fiscal rules that set caps on the size of deficits European Union countries are allowed to run (3 percent of their annual economic output) will soon be out the window.
Those rules have often been loosely carried out, but in the case of countries, like Greece, that suffered the worst of the eurozone crisis of the 2010s, their application led to deep cuts in spending that intensified downward economic spirals.Those rules have often been loosely carried out, but in the case of countries, like Greece, that suffered the worst of the eurozone crisis of the 2010s, their application led to deep cuts in spending that intensified downward economic spirals.
It’s a dynamic the European Commission wants to avoid, which is why Ursula von der Leyen, president of the European Commission, said Tuesday that her staff would work on a proposal to activate “the general escape clause” of the bloc’s fiscal rules.It’s a dynamic the European Commission wants to avoid, which is why Ursula von der Leyen, president of the European Commission, said Tuesday that her staff would work on a proposal to activate “the general escape clause” of the bloc’s fiscal rules.
That would allow countries to run up deficits in excess of 3 percent and throw money at the fight against the virus and its financial toll.That would allow countries to run up deficits in excess of 3 percent and throw money at the fight against the virus and its financial toll.
Another set of rules that are about to be bent prohibit state aid to companies. For decades, European governments lavishly subsidized money-losing companies, like utilities and airlines.Another set of rules that are about to be bent prohibit state aid to companies. For decades, European governments lavishly subsidized money-losing companies, like utilities and airlines.
The practice was phased out in a bid to create fair competition and let private companies into markets to help drive down prices.The practice was phased out in a bid to create fair competition and let private companies into markets to help drive down prices.
But in the time of the coronavirus, state aid could make a comeback, and the European Commission is looking at ways to permit it. France has announced that it’s closely watching strategic industries for bailouts or even nationalizations — a word that has been anathema in contemporary European economic orthodoxy.But in the time of the coronavirus, state aid could make a comeback, and the European Commission is looking at ways to permit it. France has announced that it’s closely watching strategic industries for bailouts or even nationalizations — a word that has been anathema in contemporary European economic orthodoxy.
Issue EurobondsIssue Eurobonds
When it comes to financial disasters, military nomenclature is preferred by European economic policymakers.When it comes to financial disasters, military nomenclature is preferred by European economic policymakers.
“The big bazooka” was a catchy phrase used to describe some crucial measures that officials were prepared to take to curb the destructive nature of the eurozone crisis.“The big bazooka” was a catchy phrase used to describe some crucial measures that officials were prepared to take to curb the destructive nature of the eurozone crisis.
The term is very much on the table again, as some European officials are considering something unprecedented: issuing debt together to help fill gaping holes in countries’ budgets as they spend billions responding to the pandemic.The term is very much on the table again, as some European officials are considering something unprecedented: issuing debt together to help fill gaping holes in countries’ budgets as they spend billions responding to the pandemic.
The idea of issuing so-called eurobonds — debt backed by all members of the bloc — was considered, and rejected, during the financial crisis as a way to help Italy with its enormous debt. Germany, the Netherlands and other countries opposed the idea, which they viewed as a way of shifting their wealth to a country with a history of irresponsible spending.The idea of issuing so-called eurobonds — debt backed by all members of the bloc — was considered, and rejected, during the financial crisis as a way to help Italy with its enormous debt. Germany, the Netherlands and other countries opposed the idea, which they viewed as a way of shifting their wealth to a country with a history of irresponsible spending.
These days, Italy still has huge deficits and debt loads, but now it is also the European country hit hardest by the coronavirus.These days, Italy still has huge deficits and debt loads, but now it is also the European country hit hardest by the coronavirus.
Fear that Italy could provoke a financial crisis has revived talk of giving the European Union much broader powers to issue bonds that Rome (and others) could use to pay for health care and to stimulate its economy without making its government debt of €2.4 trillion even bigger.Fear that Italy could provoke a financial crisis has revived talk of giving the European Union much broader powers to issue bonds that Rome (and others) could use to pay for health care and to stimulate its economy without making its government debt of €2.4 trillion even bigger.
Updated July 7, 2020
The coronavirus can stay aloft for hours in tiny droplets in stagnant air, infecting people as they inhale, mounting scientific evidence suggests. This risk is highest in crowded indoor spaces with poor ventilation, and may help explain super-spreading events reported in meatpacking plants, churches and restaurants. It’s unclear how often the virus is spread via these tiny droplets, or aerosols, compared with larger droplets that are expelled when a sick person coughs or sneezes, or transmitted through contact with contaminated surfaces, said Linsey Marr, an aerosol expert at Virginia Tech. Aerosols are released even when a person without symptoms exhales, talks or sings, according to Dr. Marr and more than 200 other experts, who have outlined the evidence in an open letter to the World Health Organization.
Common symptoms include fever, a dry cough, fatigue and difficulty breathing or shortness of breath. Some of these symptoms overlap with those of the flu, making detection difficult, but runny noses and stuffy sinuses are less common. The C.D.C. has also added chills, muscle pain, sore throat, headache and a new loss of the sense of taste or smell as symptoms to look out for. Most people fall ill five to seven days after exposure, but symptoms may appear in as few as two days or as many as 14 days.
Scientists around the country have tried to identify everyday materials that do a good job of filtering microscopic particles. In recent tests, HEPA furnace filters scored high, as did vacuum cleaner bags, fabric similar to flannel pajamas and those of 600-count pillowcases. Other materials tested included layered coffee filters and scarves and bandannas. These scored lower, but still captured a small percentage of particles.
A commentary published this month on the website of the British Journal of Sports Medicine points out that covering your face during exercise “comes with issues of potential breathing restriction and discomfort” and requires “balancing benefits versus possible adverse events.” Masks do alter exercise, says Cedric X. Bryant, the president and chief science officer of the American Council on Exercise, a nonprofit organization that funds exercise research and certifies fitness professionals. “In my personal experience,” he says, “heart rates are higher at the same relative intensity when you wear a mask.” Some people also could experience lightheadedness during familiar workouts while masked, says Len Kravitz, a professor of exercise science at the University of New Mexico.
The steroid, dexamethasone, is the first treatment shown to reduce mortality in severely ill patients, according to scientists in Britain. The drug appears to reduce inflammation caused by the immune system, protecting the tissues. In the study, dexamethasone reduced deaths of patients on ventilators by one-third, and deaths of patients on oxygen by one-fifth.
The coronavirus emergency relief package gives many American workers paid leave if they need to take time off because of the virus. It gives qualified workers two weeks of paid sick leave if they are ill, quarantined or seeking diagnosis or preventive care for coronavirus, or if they are caring for sick family members. It gives 12 weeks of paid leave to people caring for children whose schools are closed or whose child care provider is unavailable because of the coronavirus. It is the first time the United States has had widespread federally mandated paid leave, and includes people who don’t typically get such benefits, like part-time and gig economy workers. But the measure excludes at least half of private-sector workers, including those at the country’s largest employers, and gives small employers significant leeway to deny leave.
So far, the evidence seems to show it does. A widely cited paper published in April suggests that people are most infectious about two days before the onset of coronavirus symptoms and estimated that 44 percent of new infections were a result of transmission from people who were not yet showing symptoms. Recently, a top expert at the World Health Organization stated that transmission of the coronavirus by people who did not have symptoms was “very rare,” but she later walked back that statement.
Touching contaminated objects and then infecting ourselves with the germs is not typically how the virus spreads. But it can happen. A number of studies of flu, rhinovirus, coronavirus and other microbes have shown that respiratory illnesses, including the new coronavirus, can spread by touching contaminated surfaces, particularly in places like day care centers, offices and hospitals. But a long chain of events has to happen for the disease to spread that way. The best way to protect yourself from coronavirus — whether it’s surface transmission or close human contact — is still social distancing, washing your hands, not touching your face and wearing masks.
A study by European scientists is the first to document a strong statistical link between genetic variations and Covid-19, the illness caused by the coronavirus. Having Type A blood was linked to a 50 percent increase in the likelihood that a patient would need to get oxygen or to go on a ventilator, according to the new study.
If air travel is unavoidable, there are some steps you can take to protect yourself. Most important: Wash your hands often, and stop touching your face. If possible, choose a window seat. A study from Emory University found that during flu season, the safest place to sit on a plane is by a window, as people sitting in window seats had less contact with potentially sick people. Disinfect hard surfaces. When you get to your seat and your hands are clean, use disinfecting wipes to clean the hard surfaces at your seat like the head and arm rest, the seatbelt buckle, the remote, screen, seat back pocket and the tray table. If the seat is hard and nonporous or leather or pleather, you can wipe that down, too. (Using wipes on upholstered seats could lead to a wet seat and spreading of germs rather than killing them.)
If you’ve been exposed to the coronavirus or think you have, and have a fever or symptoms like a cough or difficulty breathing, call a doctor. They should give you advice on whether you should be tested, how to get tested, and how to seek medical treatment without potentially infecting or exposing others.
Only now they’d be called “corona bonds,” in a marketing trick to allay fears that this is a repeat of the eurozone crisis.Only now they’d be called “corona bonds,” in a marketing trick to allay fears that this is a repeat of the eurozone crisis.
And with Italy engulfed by a tragedy not of its own making, attitudes may change.And with Italy engulfed by a tragedy not of its own making, attitudes may change.
“This is not the time to look at the past and what Italy did wrong,” said Zsolt Darvas, a senior fellow at Bruegel, a research organization in Brussels. “If Italy goes bankrupt, the economic shock in the rest of Europe will be several factors larger” than the eurozone debt crisis that began in 2010, he said.“This is not the time to look at the past and what Italy did wrong,” said Zsolt Darvas, a senior fellow at Bruegel, a research organization in Brussels. “If Italy goes bankrupt, the economic shock in the rest of Europe will be several factors larger” than the eurozone debt crisis that began in 2010, he said.
The European Stability Mechanism, a conservative but well-endowed fund that’s able to raise €410 billion on behalf of eurozone countries, could issue and guarantee these bonds. The European Investment Bank and the European Commission could, too.The European Stability Mechanism, a conservative but well-endowed fund that’s able to raise €410 billion on behalf of eurozone countries, could issue and guarantee these bonds. The European Investment Bank and the European Commission could, too.
Give away cashGive away cash
In 1969, the Nobel-prize-winning economist Milton Friedman suggested half-whimsically that, in a severe crisis, central banks could print money and drop it from helicopters onto a grateful populace.In 1969, the Nobel-prize-winning economist Milton Friedman suggested half-whimsically that, in a severe crisis, central banks could print money and drop it from helicopters onto a grateful populace.
Now, amid serious talk in the United States of handing out cash gifts to help people get through the lockdowns, the idea is gaining supporters in Europe. After the European Central Bank announced plans to flood debt markets with €750 billion in cash, helicopter money would be about the only heavy weapon it had left.Now, amid serious talk in the United States of handing out cash gifts to help people get through the lockdowns, the idea is gaining supporters in Europe. After the European Central Bank announced plans to flood debt markets with €750 billion in cash, helicopter money would be about the only heavy weapon it had left.
True helicopter money would come not from the government but straight from central banks. They can create money that never needs to be paid back. A central bank giveaway would provide an immediate jolt to spending and confidence without creating a debt burden.True helicopter money would come not from the government but straight from central banks. They can create money that never needs to be paid back. A central bank giveaway would provide an immediate jolt to spending and confidence without creating a debt burden.
But there are several problems with helicopter money, and most economists still consider the idea far-fetched.But there are several problems with helicopter money, and most economists still consider the idea far-fetched.
To begin with, giving away money equitably is not as easy as it sounds. Europe does not have a unified social security system that could be used as a conduit.To begin with, giving away money equitably is not as easy as it sounds. Europe does not have a unified social security system that could be used as a conduit.
Helicopter money is also a blunt tool. It helps the rich as much as the needy and would not do much for businesses whose customers are staying home, like restaurants and hotels.Helicopter money is also a blunt tool. It helps the rich as much as the needy and would not do much for businesses whose customers are staying home, like restaurants and hotels.
It makes more sense to funnel aid to the people and businesses that need it most, Mr. Darvas said. For example, the European Central Bank could issue cash to commercial banks with instructions that they write business loans due in 100 years — effectively a gift.It makes more sense to funnel aid to the people and businesses that need it most, Mr. Darvas said. For example, the European Central Bank could issue cash to commercial banks with instructions that they write business loans due in 100 years — effectively a gift.
“You don’t need to give money to rich people,” Mr. Darvas said.“You don’t need to give money to rich people,” Mr. Darvas said.