"political guidance" going forward in this crisis and should accept its independence being temporarily curtailed to ensure an appropriate EA fiscal-monetary policy coordination.2) @OlafScholz suggests that "high debt countries" should get the European crisis support they need 2/n
to implement needed Covid-measures. This + comments from CSU and Macron highlights the strong political backing for a more forceful EA response (echoes of 2012!). 3) The @ECB could now at its own volition simply take this cue and suspend its current APP purchasing guidelines 3/n
until the Covid-crisis is over. 4) Or say the EuroGroup could when it meets next week declare "fiscal unlimited solidarity" during the Covid crisis explicitly extending to whatever implications this might have for the ECB balance sheet, opening up for the ECB to initiate a 3/n
new temporary unlimited crisis asset purchase program open to all member state bonds affected by Covid (knowing full well that not all members would be in any need). 5) This leaves existing ECB programs in place for "normal times" - the APP for monetary policy transmission 4/n
and OMT for fiscal recklessness, but offers the ECB the political backing to fully join the "unlimited Covid support" effort. 6) This will represent a de facto reduction in the ECB's independence during this extraordinary crisis, but well - after yesterday, that was coming. 5/n
As my colleague @nicolas_veron has made clear to me, current EA politics is particularly fortuitous for such fiscally-led-but-ECB-implemented "unlimited support" in so that Mitsotakis' Greece is doing "Europe's job on the border", Italy is mounting herculean efforts on Covid, 6/n
and finally this crisis is an"imported shock" which could have hit anywhere, meaning that moral hazard concerns should simply not apply. Speed is at the essence, and the EA must not succumb to what my ex-colleague @AngelUbide rightly calls "program mentality", trapped in 7/n
"conditionality thinking" and inevitable national political grandstanding when "programs" has to pass national parliaments. This is not the time to remain trapped in trying to fight an unprecedented crisis with only the "existing tools" however expertly tweaked. This is an 8/n
unprecedented situation for the EA, and it requires new thinking and new tools to address. ENDS
