Good political leadership during this pandemic has had a woman’s face. Women leaders have been the most successful because they know how to communicate bad news with clear information and recommendations expressed with empathy. Their policy communication has been honest, transparent and scientifically-based; the sharing of data and numbers helps the public understand the situation and appreciate why certain measures are necessary.
At the same time, the concerted understanding that “we are all in this together” has enabled Europe with a strongly shared determination among all member states (27) to move forward together by borrowing together ($859 billion) and allocating grants and loans to those members who need them the most (Spain, Italy, Greece, Poland, among others). It has also helped Europe drawn two key lessons from reopening after the first (and hopefully only) COVID19 wave: 1) gradual deconfinement must be accompanied by mask wearing and social distancing and 2) that we are all in this together, so pandemic responses and measures must be taken together.
Monetary policy is key to moving forward. The baseline forecast for Europe in 2020 is an 8.7% contraction. But a massive second COVID-19 wave and reconfinement could derail it and worsen the forecast to +12%. So recovery will be touch-and-go. In the face of uneven and uncertain recovery, the ECB’s approach is significantly different that the one by the U.S. Treasury because their markets are different. Europe handles financing through national central banks; the U.S. can address specific targeted sectors because it has deeper, more vibrant capital markets. However, contrary to concerns expressed, European banks don’t have solvency issues, but there does need to be greater consolidation within and across borders.
Contrary to the current U.S. administration’s focus for the future, the post-pandemic global economy for Europe has a considerable focus on green bonds, of which 40% around the world are issued in euros and of which the ECB buys 20% of all available sovereign, not corporate, bonds. Price stability is the ECB’s only mandate, and it is significantly affected by climate stability, especially taking into account that the green sector will be expanding.
According to Lagarde, the post-pandemic global economy will lead to an acceleration of transformations, with a focus on the green economy, digital technologies and the rise of new partner-based supply chains conscious of cost-cutting and of the inherent added value for proximity. Reframing the post-pandemic world economy will therefore require greater mindfulness of communities around the world. We are all interrelated and interdependent in the face of global challenges. The bottom line: the global economy requires union, not division.
What an inspiring interview!
Astrid Ruiz Thierry, Principal, Upboost LLC
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