The lockdown measures taken by states to stem the spread of the coronavirus have triggered the worst recession in post-war history. To support workers who are unable to work and companies who are unable to trade and to prevent the economy from sliding out of a severe but "normal" recession into the downward spiral of depression, fiscal packages worth billions are currently being passed around the world (Fig. 1). These packages are undoubtedly unavoidable in the current desperate situation. But there should be no doubt that they will have serious side effects in the long term.
Fig. 1: This is going to be expensive - Announced fiscal measures of selected countries
Sources: IMF, DWS Investment GmbH as of May 2020
- What will be the level of public debt by the end of the crisis?
- How can this national debt be reduced again? In other words, who is going to pay?
- What will be the long-term effects on productivity growth?
- For the second time in less than 15 years, it is the state that has to rescue the economy from collapse. What are the social and political implications of the greater role that the state is playing during the crisis?