INTERVIEW
The global coronavirus epidemic could have far-reaching consequences for the economy. On Monday, the OECD issued a warning: global growth is not expected to exceed 2.4% this year, at best. The G7 and the Eurogroup are mobilizing. The World Bank has released $ 12 million in aid to help the poorest countries, and the US Federal Reserve (FED) on Tuesday announced lower interest rates to protect the United States from the consequences of the virus. Laurence Boone, chief economist at the OECD reviews Europe 1.
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An isolated action that worries the markets
"There is concern because a lot of uncertainty about the virus and the containment measures that go with it," said Laurence Boone. "The central banks have said they are ready to act, and one of the ways to act is to lower interest rates so that all the people, companies or states that have a loan do not find themselves facing difficulties for pay."
Wall Street was disillusioned after having soared when the FED was announced: the Dow Jones yielded 2% and the Nasdaq 1.58%. "The markets were waiting for a coordinated movement, much like what happened four days before the four most important central banks in the world issued press releases," analyzes the economist. The isolated action of the FED has raised questions about the markets. "Does the government not know how to act?"
At European level, interest rates are already low. The room for maneuver is not the same. Nevertheless, Laurence Boone wants to be reassuring. "This is not a financial crisis but rather an economic shock if we had to characterize it. It is not action from the central banks that we need, apart from this reassuring gesture, but actions from from governments. " She cites several examples: ensuring that companies are not going to have cash flow problems, or that people are not going to have unemployment or income problems during periods of confinement. "It's more for the government than for the central banks."
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Spending to cope with a temporary economic shock
Laurence Boone calls on the government to spend to deal with this temporary economic shock. "There are several things that can be done: ensuring that health workers are paid well during this period, for example, ensuring that companies have enough liquidity, cash. To do this, the state can suspend or postpone the paying charges and taxes to keep them running and keep people employed. "
"I think that at this time, with the economic risks that we have, we really need to help people and businesses get through this shock. If we postpone tax payments, if we eliminate them, if we make spending to keep people in employment will impact public finances. It must absolutely be accommodated to slow the economic shock and to start again as quickly as possible. " She hopes very much from the future meeting of the Eurogroup, the finance ministers of the euro zone countries, so that they agree on the relaxation of the rules, in particular that of the 3% deficit, to take targeted measures. .