Guest of "It happened this week" on Europe 1, the former chief economist and director of studies at the IMF returned to the economic crisis that could follow the Covid-19 health crisis. Olivier Blanchard judges that today, "the debt is not the problem" and considers that the State must continue to help people in difficulty.

INTERVIEW

Will the coronavirus health crisis lead to an economic crisis? In the world, the stock markets have collapsed, in the United States, unemployment has exploded and in France, the government has announced aid plans worth more than 100 billion euros. INSEE warned: each month of confinement costs around 3% of annual GDP in France. An unprecedented situation that has worried economists. But for Olivier Blanchard, former chief economist and director of studies at the International Monetary Fund, guest of  It happened this week  on Europe 1, "debt is not the problem of the moment".

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"It is not catastrophic" to increase the debt

"The priority is to make sure that people do not starve and that companies do not go bankrupt. If we increase the debt, it is not catastrophic. We will deal with it later", says the former chief economist and director of studies at the International Monetary Fund. "We absolutely have to help people and businesses that are in difficulty. We can do it for a while, it will cost money, but we are ready to do it and it is absolutely necessary." 

Olivier Blanchard justifies the feasibility of his remarks by the economic state of France before the crisis. "Interest rates were extremely low (close to zero) for countries like France when they borrowed and this will probably be the case for a very long time," he explains. "All the factors of the crisis make it likely that interest rates will remain low, so the debt burden will remain very low."

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"It's going to be long, it's going to be hard, but we can do it."

Even if he recognizes that "we cannot be absolutely sure", the economist affirms that "we can afford a higher debt". "One day it will have to be reduced, but there is no urgency. So we can climb to higher debt levels", continues at the microphone of Europe 1 Olivier Blanchard, citing Japan which has used this lever. "It's going to be long, it's going to be hard, but we can do it."

"I believe the collapse is right behind us"

But if the State continues to take part in economic activity when companies can no longer function, are we not risking a "collapse", as Édouard Philippe feared in his speech to the National Assembly? "It's a very bad time to pass, that's for sure, but I think the collapse is just behind us," replied Olivier Blanchard. "We have seen the bottom of the hole and now we will have to climb slowly. Of course there will be long-term effects and some will suffer along the way. But I think the worst is just behind us," said former chief economist and director of studies at the IMF. 

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"A return to normal within six to eighteen months"

And if the whole economy is hit by the crisis, Olivier Blanchard predicts a long and painful process of "reallocation" between the sectors, explaining that some will suffer enormously (catering, hotels, tourism) while others " will also win during this crisis, "like the technology sector. "But in the economy as a whole, I think we can return to an almost normal level within six to eighteen months," concludes Olivier Blanchard.