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Covid crisis : impacts and responses

 

Covid crisis : impacts and responses

Context

We are experiencing with the Covid-19 pandemic an unprecedented crisis, pushing the global economy into the worst recession since the Great Depression. Central Banks and governments have taken a wide range of measures to sustain the supply of credit to the real economy, support financial intermediation, and preserve the resilience of the global financial system. But this exogenous shock is placing the financial system under considerable strain.

The Covid-19 outbreak is however more a powerful amplification factor of a latent debt crisis rather than a cause in itself of the current situation. Indeed, lasting zero – and even negative – interest rates have allowed businesses, States and leveraged investors to take on unreasonable debts, making them vulnerable to deteriorating economic and market conditions.

The resulting excess liquidity in the financial system has generated bubbles of financial assets and their bursting, thus further weakening the financial system and hampering economic recovery.

Strong policy responses and international cooperation are required to tackle the unprecedented health, monetary, economic, and financial stability challenges posed by the Covid-19 pandemic. Fiscal discipline and solidarity will be needed in the euro zone, where the heterogeneity of deficits and public debt, and therefore of tax margins, is particularly marked.

Contributions to the policy debate

Extracted from the main Eurofi publications (Regulatory Updates, Views Magazines and Conference Summaries)

Public and private
sector views

Industry views

Policy responses

J. Gual - Caixabank - Europe’s greatest challenge - April 2020

Dr. J. Haegeli - Swiss Re - Post-crisis recovery agenda: we need it now - April 2020

Dr. K-P. Schackmann-Fallis - DSGV - Solidarity and Stability in Europe - April 2020

B. Spalt - Erste Group - Coronavirus has the power to transform Europe towards deeper integration - April 2020

Implications for the financial sector

J. Antonio Álvarez - Santander Group - This time it’s different. Let’s keep it that way. - April 2020

M. Bayle de Jessé - CLS Group - COVID-19 and the importance of resilient financial market infrastructures - April 2020

A. Birry - S&P Global Ratings - COVID-19 will expose many of European banks’ strengths and opportunities - April 2020

K. Duxfield-Karyakina - Google Cloud - Resilient cloud: supporting the financial sector in a time of uncertainty - April 2020

J. Lemierre - BNP Paribas - CoVid-19: banks are part of the solution - April 2020

M. Ronner - UBS - Decisive action for a strong European banking sector - April 2020

S. Revell - BNY Mellon - Thoughts on Covid-19 – the importance of people - April 2020

C. Roux - Groupama - Will the financial center hold in the current economic sudden stop? - April 2020

B. Sibbern - Nasdaq - Cooperation prevails – through and beyond Covid-19 - April 2020

J. Viñals - How banks respond to the crisis now is critical to the global recovery - April 2020

M. West - Moody’s Investors Service - Coronavirus exposes global financial market vulnerabilities - April 2020

Monetary policy impacts

J-J. Bonnaud - Eurofi - For a new Bretton Woods - April 2020

D. Borowski - Amundi - That’s one small virus for man, one giant leap for economic policy - April 2020