June 4 brought two important pieces of good news. The first was an agreement within the German grand coalition government to add €130 billion to its fiscal response to the economic consequences of the coronavirus pandemic. The second was the decision by the European Central Bank’s (ECB) governing council to add €600 billion to its pandemic emergency purchase program, to extend that program to June 2021, and to maintain or rollover any holding in that program through 2022. The question is whether this is going to be enough to hold disaster at bay. Given the nature of this crisis, the answer is always going to be uncertain. The same doubts apply to the European Commission’s proposal for a ‘next generation EU’ (European Union) recovery program.

Europeans can still afford to be optimistic. Even if they turn out to be inadequate, this collection of policies shows that Europe’s leaders have mastered the lessons from the last crisis and are determined to respond to the current crisis in an effectively coordinated fashion. So long as Europe’s leaders continue along this path, they should be able to rise to the occasion.

Continue reading →