A forceful, symmetric European response is needed, ECB Executive Board member Fabio Panetta writes in @POLITICOEurope. Failure to act now will amplify the costs of the crisis. It will also weaken the policy responses already being undertaken 1/7 https://www.ecb.europa.eu/press/inter/date/2020/html/ecb.in200421~a7f2ec5159.en.html?utm_source=ecb_twitter&utm_medium=social&utm_campaign=200421_speech_FP

Eurozone economies are tightly interlinked through supply chains, financial connections and trade relationships. As a result, a slump in a large part of the eurozone will depress growth and employment across the entire region 2/7

Today’s crisis exacerbates these dynamics in two ways: the global nature of the shock means European countries cannot redirect their production to satisfy demand from elsewhere, while high participation rates of eurozone firms in global value chains will amplify the shock 3/7

There’s also the risk of political spillovers. Any perception that common action is absent now would dilute public support for the EU, which is already visible in countries on the frontline of the health crisis. Ultimately, this perception could erode trust in euro 4/7

A European fiscal response must be based on 3 principles:
- the size should be proportionate to the shock’s magnitude
- it should not aggravate fragmentation stemming from differences in initial fiscal positions
- it should not skew the playing field within the Single Market 5/7

Whichever funding model is chosen, the goal of fiscal policy must be to push the financing costs of this crisis very far into the future. European issuance today will create the fiscal policy space needed to secure higher growth in the future 6/7

Acting now will help all member countries shorten the duration of the crisis period. It will protect the economic base upon which their future production structures and exports rely, and uphold the promise of a shared and indivisible European destiny 7/7 https://www.ecb.europa.eu/press/inter/date/2020/html/ecb.in200421~a7f2ec5159.en.html?utm_source=ecb_twitter&utm_medium=social&utm_campaign=200421_speech_FP