"We are faced with a war against the coronavirus and we must move accordingly": the challenge is "how to act with sufficient force and speed to prevent a recession from turning into a prolonged depression, made even worse by a plethora of defaults that they leave irreversible damage ". Mario Draghi, the former president of the ECB, writes in a long comment in the Financial Times in which he expresses his opinion on the effects and on how to counter the crisis caused by the coronavirus.
"It is already clear that the response" to the war against the coronavirus "must involve a significant increase in public debt," says Draghi. "The loss of private sector income will eventually have to be absorbed, in whole or in part, by government budgets. Higher levels of public debt will become a permanent feature of our economies and will be accompanied by a cancellation of private debt."
"The priority must not be only to offer basic income to those who lose their jobs. We must protect people from losing their jobs. If we do not, we will emerge from the crisis with lower permanent employment," writes the ex-president of the ECB underlining that "levels of public debt must go up. But the alternative would be even worse damage to the economy".
"In the face of unforeseen circumstances, a change of mentality is necessary in this crisis as it would be in times of war. The shock we face is not cyclical. The loss of income is not the fault of those who suffer from it. The cost of the hesitation could be irreversible. The memory of the sufferings of the Europeans in the 1920s is a warning ". Draghi writes it in the Financial Times, speaking of "war against the coronavirus".
In many ways "Europe is well equipped" to deal with this "extraordinary shock. It has a financial structure capable of bringing together funds in every part of the economy. It has a strong public sector capable of coordinating a rapid response. The speed is essential for the effectiveness "of the response to the coronavirus, writes the former president of the ECB.