The Coronavirus Impact on the European Union

Are we on the way to an economic crisis?

German chancellor Angela Merkel surprised the EU community on Friday by announcing Germany steps to confront the Coronavirus pandemic.

In order to protect Germany’s economy, the German Finance Minister has promised to extended unlimited credit to the business that have been affected by the virus, furthermore, The German authorities are also discussing issuing further aid to EU countries that have been overwhelmed by the epidemic such as Italy and Spain.

This might be a very good short-term solution; however, it is very clear that if the situation continues for more then a few months, or any additional countries join the list of overwhelmed countries, it will be each to his own, and we might see the collapse of The European Union.

While the talk of “Corona Bonds” may keep the EUR in good shape, it is doubtful it will last for a long.

To overcome this problem, Germany will have to finally shift its position on eurozone governance and EU integration. It will need to abandon previously drawn red lines and show more solidarity with its European partners than it has in the past decade. Scholz has already stated that EU states with higher debt levels should have the flexibility to pass fiscal measures. On Monday, the Eurogroup pledged “to do whatever it takes to effectively address the current challenges.” Collectively, EU finance ministers promised a fiscal boost of 1 percent of gross domestic product.

Whatever it Takes

The European Investment Bank will transfer up to €40 Billion to fight the Coronavirus and has called on EU governments to set up further guarantees for SMEs.

“The pandemic is also having a devastating economic effect which is already showing, EIB President Werner Hoyer has said in a statement:

“Europe needs a ‘whatever it takes‘ moment in regard to the Coronavirus response,” he said.

International Monetary Fund (IMF) managing director Kristalina Georgieva has also urged robust global action.

Our conclusion is are we on the way to a total meltdown? No

Our we on the way to very difficult times and a harsh recession? Absolutely.

(All that financial aid will need to be paid back one way or another.)