Coronavirus: The economic challenges of the Covid-19 crisis
By Andreas Theophanous
The situation that has been created with the spread of Covid-19 almost throughout the world is indeed extraordinary. This pandemic, as declared by the World Health Organisation, entails multiple repercussions which affect all aspects of life. Chancellor Merkel stated that this is perhaps the greatest challenge since World War II.
What is taking place seems like a science fiction scenario. Unfortunately though, it is a reality that we have to address with perseverance. Protecting public health and saving lives constitute vital priorities. Inevitably though this entails casualties; and the number of deaths will increase before Covid-19 is contained.
In most countries the national health services are overwhelmed. Likewise there was inadequate planning and organisation with the outbreak surprising almost all governments. The seriousness and the implications of the crisis were initially underestimated.
It is essential to also underline that there have been different national approaches in addressing the crisis. France, Greece, Cyprus and Israel are among those that eventually took restrictive measures to counter the spread of the virus. Other countries, such as Britain, initially adopted an alternative approach which inevitably would have soon led to the infection of more than 70 per cent of the population. It should be noted that Chancellor Merkel also made statements pointing to similar predictions for the German population. The British authorities believed their approach would have enabled the country to face the pandemic more effectively. It entails a form of social Darwinism; in sum, the elderly and other vulnerable groups would have to pay a much heavier price. It did not exclude the victimisation of people/citizens from other social and demographic groups. Following criticism and reassessment, the British government has eventually moved toward adopting at least some restrictive measures.
And while there is a growing concern for the continuous spread of the pandemic there are other major issues which emerge as an outcome of this complex situation. It is important to assess and address the broader economic consequences of this crisis. Inevitably there is already a serious decrease in economic activity. If the duration of this pandemic lasts much longer countries will be facing a very serious recession, unless drastic economic measures are taken.
These dramatic events remind us once more of the vital importance of the role of the state, especially in times of such crises. It is essential to revisit the rules and pillars that should guide a modern socioeconomic model. The pillars and overall architecture of the Eurozone should be revisited. It is inconceivable to insist on balanced budgets, irrespective of circumstances and socioeconomic conditions, as if it is a golden rule.
In relation to the broader macroeconomic domain, pursuing an expansionary fiscal and monetary policy is currently imperative. This may include money creation/printing to fund the enhancement of health services and targeted programmes to support economic activity and vulnerable social groups. At the same time, states, public and private institutions and organisations, business enterprises, universities, think-tanks, research centres and other entities should take the necessary steps so that they enhance their effectiveness.
The Covid-19 crisis entails multiple challenges. Inevitably, it will test the resilience and the effectiveness of states to adequately address all the dimensions of the crisis. It also reminds us of the importance of individual and collective responsibility as well as of solidarity. At the same time we are witnessing once again the reemergence of the necessity of a comprehensive socioeconomic paradigm to effectively address the multidimensional challenges of the modern era.
Andreas Theophanous is professor of economics and public policy, the president of the Cyprus Center for European and International Affairs and head of the department of politics and governance at the University of Nicosia.
