Economic consequences
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The actions of the European Central Bank will determine outcomes
Following the 2008 crisis, the ECB was a stabilising influence for Eurozone nations, which reduced the impact of the crash. If it can do the same after the coronavirus, it will bring the region closer together.
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The Argument
In 2008, the world faced a devastating financial crisis. Economies all over the world felt the impact and suffered from it. In response, the European Central Bank stepped in to intervene. The actions it took helped to mitigate the damage to many countries' economies.
In response to the crisis, the ECB adjusted interest rates, reducing them by 325 basis points. This helped decrease risk and aided price stability. They also took several "non-standard" measures, unusual policies that mitigated the damage done. Among other things, the ECB extended collateral, improved refinancing operations, and purchased covered bonds. These measures all contributed to supplementing the needs of the European economy.[1]
The coronavirus pandemic has imposed many financial hardships on the world. As the world reopens, nations will have to reckon with these hardships and nurse their economies back to health. The ECB has stepped in to help before. It will likely do so again, perhaps with similar methods.
Counter arguments
The ECB's response to the 2008 crisis was flawed, to say the least - especially compared to, say, the US Federal Reserve. The ECB's measures were slow, indecisive, and limited in efficacy. As a result, they didn't help European economies as much as they could have. It would be unwise to put too much stock in their measures.[2]
In addition, the conditions of today's world and today's economies are very different from those of 2008. This is especially the case in the wake of an unprecedented global pandemic. The worst thing for the ECB to do would be to recycle the same flawed measures they took more than a decade ago, and apply them to today's world. At best, it would take them a long while just to come up with a new strategy - and even then, the effectiveness of that strategy isn't guaranteed.
Proponents
Premises
Rejecting the premises
References
- https://www.ecb.europa.eu/press/key/date/2009/html/sp090612.en.html
- https://voxeu.org/article/ecb-s-performance-during-crisis#:~:text=The%20ECB%20then%20provided%20those%20dollars%20to%20banks%20in%20the%20euro%20area.&text=Simultaneously%2C%20dollar%20liquidity%20helped%20raise,vulnerability%20of%20euro%20area%20banks.