Record Debts to Combat Covid-19 Consequences – What Can the State Afford?
ifo Institut, München, 2020
ifo Schnelldienst, 2020, 73, Nr. 08, 03-32
The coronavirus pandemic and the ensuing lockdown are leading to a deep economic crisis worldwide: governments and central banks are responding to the coronavirus crisis by providing vast sums of money to stabilize the economy. As tax revenues collapse, aid for the economy has to be financed by a sharp rise in national debt. At the same time, the central banks are opening their money floodgates. As a result, the states are financing their economic stimulus packages to a considerable extent by printing money; however, the financial conditions for dealing with the economic consequences of the coronavirus pandemic vary greatly among European states. What are the limits of public debt? Will it be possible to reduce public debt to a reasonable level after the crisis?