Contrary to most other (European) countries, Sweden mainly relied on voluntary measures rather than binding restrictions in its fight against the coronavirus. This 'soft' anti-corona strategy was applauded by some, but there is not yet overwhelming evidence that it has drastically reduced economic costs. There are indications that the milder lockdown has spared the domestic economy a little. Sweden’s situation reminds us that in small, open economies, such as Belgium's, budgetary stimulus is not very effective in stimulating economic recovery, and the focus on competitiveness is all the more important.
The situation in Belgium is such that continuing on the current course is no longer an option. Fiddling in the margins, or muddling politics is a postponement of action, where our legacy consists of an exhausted planet, an overtaxed population that is weighed down by heavy debt and governed by a multi-headed oversized administration. The Corona crisis should enable the substituting of the mentality "as long as the orchestra is playing" with a sense of urgency whereby responsibility and solidarity are no longer empty concepts. This presupposes a vision of the future of our country embedding structural measures. Although such an approach needs to be holistic by nature, this paper highlights two concrete measures, one linked to structural fiscal reform and one linked to a reshoring vision for our industry.
Like every crisis, covid-19 holds the opportunity to strengthen our economy/society through lessons learned from the crisis. This obviously requires that we take away the correct lessons from the current episode. In the past few months a number of all too easy conclusions have been drawn from the crisis that are not supported by the facts. Flexibility, robustness, digitalization and internationalization are, up to now, the key lessons from this crisis.
This article uses anonymised and aggregated transaction data of ING Belgium customers to analyse the impact of confinement and deconfinement periods on the consumption behaviour of Belgians. It shows that, while confinement has led to a very sharp fall in Belgian spending, deconfinement has not led to a return to normal.
In July, the Study Committee on Ageing published its 19th annual report estimating the budgetary impact of ageing over the long term. More in particular, it concerns a forecast until 2070 of the change in all social expenditure expressed as a percentage of gross domestic product (GDP). Since the projections made are inevitably based on hypotheses surrounded by (sometimes considerable) uncertainty, this is by no means a prediction. This year, on top of the traditional uncertainty inherent in long-term forecasts, there is an additional uncertainty regarding the evolution and socio-economic consequences of the COVID-19 epidemic. This short article summarises the hypotheses of these consequences and shows the extent to which they have an impact on the estimated costs of ageing.
The Covid-19 pandemic calls for a contracyclical policy support of great magnitude. It would be a waste of not infinite means not using it in a way to simultaneously reallocate resources in a sense that was already clearly identified prior to the crisis, starting with environmental sustainability. In addition, both policy and theoretical lessons from the crisis have to be drawn. The paper addresses ten issues: (1) the sense of economic forecasts at times of an unanticipated major crisis; (2) the art of cost-benefit analysis applied to public health trade-offs; (3) rules of the market economy game lacking consistency to the advantage of shareholders; (4) the compatibility between urgency and structural reforms; (5) the conflict between cost compression and business resilience; (6) the additional challenges facing the assumed virtues of international trade; (7) the likelihood of an eventual inflation revival; (8) the limits of both monetary and budgetary policies being reconsidered, as their interaction; (9) the environmental transition when the more difficult “end of the month” does interplay with the need to prevent the “end of the world”; and (10) crises as tailwind or headwind for European integration.
We show that in the current macroeconomic environment, in which nominal interest rates are expected to remain below the sum of real GDP growth and inflation for some time, the rise in government debt due to the Covid-19 recession and fiscal policy responses is feasible without ever having to raise taxes. Specifically, a rise in public debt due to a temporal increase in the deficit automatically vanishes over time. Even when Covid-19 leads to a permanent rise in the government deficit, a permanent (moderate) decline in real GDP growth and persistent (moderate) deflation, the debt-to-GDP ratio will stabilize in the long run without a later increase in taxes, even though the level of stabilization will be at a higher level. Our purpose is not to argue for more public debt and an unlimited stimulus, since interest rates may not be lower forever, but to have a richer discussion of the fiscal policy response to the crisis than is currently the case.
This article highlights what the European Semester, the annual coordination cycle of economic, employment and social policies of Member States, stands for, with an emphasis on how it has evolved over time (part I). The diagnosis by the European Commission services of the economic dimension of this unprecedented crisis is also summarised (part II). We will then set out the contours of the economic response the Commission has proposed, i.e. an EU Recovery Plan, as amended and validated by all 27 EU Leaders on 21 July 2020 (part III). We focus on the backbone of this plan – the Recovery and Resilience Facility - which is to radically increase the European Semester’s relevance in driving the socio-economic repair and recovery of the European economy (part IV). We also describe the reform and investment opportunities for Belgium, as identified in the context of the European Semester, that could be part of a Belgian recovery and resilience plan that can help Belgium recover and emerge stronger from this crisis (part V). In a last section, we set out the next steps for the implementation of the EU Recovery Plan as well as our conclusions (part VI).
Dit boek heeft tot doel enige ideeën aan te brengen over de mogelijke aanpassing van de financiële instellingen – in België dus vooral de banken – aan de mogelijke en/of gewenste evolutie van de economie en de maatschappij in het algemeen.
While the ECB is not allowed to monetise debt formally in the wake of the Covid-19 crisis, there seems to be some scope to do so, without fear of galloping inflation. It might even be needed to hit the inflation target.