The 100% guarantees became necessary because getting loan funding to the worst affected sectors via commercial banks with risk limits required it. The choice over what to do next (allow high rate of business failures, equity injections etc) were always the trade-offs. https://twitter.com/Gilesyb/status/1287295877267296256

The EU’s now scrapped Solvency Support Instrument tried to bridge the issue of firms navigating next stage of the crisis (gradual reopening but with persistent social distancing and periodic increases in stringency of measures) by using guarantees to crowd in equity investment.

Extending the loans might be a necessary stop-gap but some form of equity injection is also likely to be necessary for the worst-hit sectors for as long as government guidance continues to restrict capacity - providing the measures are considered temporary.

Loan guarantee model has an inherent asymmetry problem - government underwrites the downside but has no participation in the upside - which makes sense when you’re trying to get money moving during acute phase but harder to justify once conditions start normalising.

Equity injections can give government participation in the upside but the experience of the bank bailouts in the financial crisis (and some of the estimates at the time of the long term costs) has lowered the political appeal.

But compared to costs of persistently high unemployment, wholesale labour reallocation against the backdrop of weak demand, and rapid pace of business failures I think the costs are likely to be relatively modest. Alternative is to assume structural break & let whole sectors fail

As @stephenkb etc have argued good news so far on vaccines should make government cautious over assuming changes in consumption patterns over COVID will prove permanent. Acting as if they are can crystallise losses from loan guarantees unnecessarily & have lasting impact on econ

At any rate, central point at start of this thread that government should not have issued 100% loan guarantees is wrong I think. Context was failure of U.K. loan programme to get going (esp compared with European peers) due to lack of state-owned lender to provide transmission