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In a matter of weeks, the novel Coronavirus (COVID-19) has transformed Western democracies. States have shut down businesses and sealed people indoors. With the expected slowdown in the economy and dark clouds of a global recession, governments around the world are scrambling to find a financial cure that would stimulate the economy and midgate the projected adverse effects. 

So far, policy responses around the world were swift and decisive, as governments have promised to spend trillions of dollars to keep the economy on life support. Earlier this week, leaders of the G20, the world’s largest 20 economies, pledged to inject over $5 trillion into the global economy to limit job and income losses from the coronavirus stating that they will “do whatever it takes to overcome the pandemic.”

In the U.S., Congress has recently passed a stimulus package worth over $2T, 10% of the nation’s GDP, twice what was promised in 2007-09. Credit guarantees by Britain, France, and other countries are worth 15% of GDP. Central banks are printing money and using it to buy assets they used to despise. For a while, at least, governments are seeking to ban bankruptcy.

Additionally, central banks around the world have cut interest rates by more than 0.5 percentage points since January and are continually taking easing monetary measures such as buying and creating bonds. On the most conservative measure, the global stimulus from government spending this year will exceed 2% of global GDP, a much bigger push than was seen in 2007-09. 

In particular, the European Central Bank is promising more or less to buy everything that governments might issue. Also, the U.S. Federal Reserve pledged to buy unlimited quantities of Treasury bonds and agency mortgage-backed securities, if necessary. Some other central banks also announced new programs to support the flow of credit to companies and consumers, across fragile inquiries like airlines and services. The Fed is now the direct lender of last resort to the real economy, not just the financial system.

Despite these grand plans, some are calling for governments and banks to broaden the scope of financial aid. Experts have argued that, indeed, stabilizing the economy now and helping businesses survive must be priority number one. But providing immediate relief shouldn’t be the only strategy for achieving those goals. On the other hand, others have claimed that these massive stimuli are preventing the economy to “grow” in the direction that it should take (heavily digitized economy at the expense of other sectors), or that efforts might not be more than a bailout for large corporations. 

Regardless of the different perspectives, governments around the globe are facing immense challenges that will affect society for years to come. The likely economic effects of the pandemic reach far beyond the role of the state. But the redefined part of the state, in any action it wishes to take, could prove to be the most significant shift. 

For more from The Economist, click here

For more from The International Monetary Fund (IMF), click here.

For more from Bloomberg, click here.  

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