"The United States is the only economy in the world that can afford to spend so much"

Text by: Aabla Jounaïdi Follow

In the United States, the Trump administration and the Senate agreed on Wednesday on a plan to massively support the economy. An injection of liquidity, including $ 500 billion for the most affected industrial companies and $ 500 billion in assistance to citizens. Sylvie Matelly, economist and deputy director of Iris, sheds light on the challenges of this historic plan.

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RFI: Nearly 2,000 billion dollars, 10% of American GDP injected into the economy. Is this a sufficient response to deal with the crisis?

Sylvie Matelly: It is difficult to say because we still have very little visibility on the consequences of this crisis. However, what is certain is that it is quite unique. At the time of the 2008 financial crisis, the plan planned by Barack Obama was around 400 billion dollars. He focused on specific projects, notably the objective of developing shale gas. This time, it is a plan of a magnitude never seen before. With a particular method: give money directly to those who need it most, whether businesses or households . The idea is twofold, first, to prevent small businesses, those that employ the most people, from going bankrupt during this period. The second idea is to allow consumption to continue.

► Read also: The American economy ravaged by the coronavirus pandemic

We feel President Trump, very eager to resolve this crisis caused by the coronavirus epidemic.

You have to keep in mind that Donald Trump is campaigning. He is playing for his re-election and until now he had a boulevard. Suddenly, this big pebble arrives in his shoe which risks making him stumble. This is why Trump is a little annoyed to declare a generalized confinement because in this case, the announced plan will have at least short-term effects at least in the short term. The United States believes that it is the only economy in the world that can afford to spend so much, without suffering the consequences for its financial base and credibility. The country has the capacity to mint money to repay debt and therefore to have an extremely expansionary monetary policy. It also means that if that is not enough, the American administration can go much further.

This Thursday is held (remotely) the G20 summit. Can the States present manage to coordinate their responses to the crisis?

There is a big difference with the context of 2008 to resolve the financial crisis. Even if the states had hardly coordinated to react in common at the time, there was still a shared feeling that it was better to get along. Multilateralism and economic openness were still the dominant ideas, including on the part of the United States. But if the current crisis has brought to light one thing, it is the return of protectionism and tensions between states. From China to the United States, via the European Union, it's each for itself.

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