The Covid-19 pandemic poses unprecedented challenges for our economy. What are the options to deal with these? And why is the banking sector once again the elephant in the room? In a blog series, we want to shed light on these questions.
On February 22, Italy reported the first two humans that fell victim to Covid-19 in Europe. Barely six weeks later, thousands of people have died from this new coronavirus, and virtually the entire continent has shut down. To prevent further infections, people have stopped traveling, reduced work and stayed at home. Production and consumption is collapsing.
While many aspects of economic life come to a halt, others continue. Companies might not sell their products and services anymore, but they still have to pay interest on their debt, rent for their premises, taxes, salaries and other operating costs. For most businesses, the Covid-19 pandemic reduces income much more than expenses. This is causing economic distortions of unprecedented dimensions – and called for governments and central banks to step in.