Le Monde: Who will pay the Corona virus debt?

Faced with the emerging epidemic of the Corona virus (Covid-19), European leaders promise to support the economy "at all costs," but the creation of the money that underpins this commitment could lead to inflation that may be difficult to control, according to a report in French newspaper Le Monde.

Columnist Stefan Lauer says that no one imagined that the phrase "whatever it might cost" that European Central Bank President Mario Draghi used on July 26, 2012, in the midst of the euro crisis when he said that the bank would do everything it could to save the single currency; it would resonate For future generations.

Today, from Christine Lagarde - the successor of Draghi - to French President Emmanuel Macron, passing through British Prime Minister Boris Johnson, world leaders have repeated these words on many occasions, which are supposed to spare the global economy the fate that will befall it due to the coronavirus.

In the short term, similar phrases aim at reassurance, but as soon as this crisis is over, sooner or later - it must be asked what this sudden sympathy by the monetary or governmental institutions of European citizens will mean.

The author explains that the phrase "whatever it costs" means the influx of thousands of billions of euros, which is supposed to revive a declining economic activity.

While countries promise to bypass financial barriers to compensation, rescue, lending, and exemption, central banks appear as if they are the only lender, by recovering public, even private, debt in an attempt to maintain the lowest possible interest rates. But the gap between monetary and fiscal policies is greater than ever, the author sees.

It is not time for optimism
And the writer indicated that just like caring for a patient with coronavirus, it is about putting the economy under artificial respiration, as the health crisis begins to improve.

The problem is that it is not known at this stage how long the health crisis will last, nor if the recovery followed is sufficient to get rid of all the “Corona debt”. Honestly, this is not the time to be optimistic, says the author.

Everyone may ask - according to the author - the source of these funds, at a time when European leaders were reiterating two phrases a few weeks ago, namely, reducing the deficit and reducing public spending.

Some naive ideologists believe that the facts have proven right, that in the end these debts will not be paid; therefore, it was possible to benefit from many levels: from generous social benefits, an effective health system, good public service, means of eco-transportation, and lower taxes.

But the truth is not so. In a few days, the world economy has changed, so it is now acceptable to produce money almost any time to avoid detonating a system that a virus has only been able to harm.

Rich in our debt
The writer said that the liquidity that will flood the planet, as well as the collapse of production, will automatically drop the value and purchasing power of money. Money is no longer linked to the creation of tangible wealth, but is printed according to the needs of bailout individuals, companies and countries, already burdened with debt.

"We will very soon be rich in our debts, just as Spain was in the 16th century, rich in its gold obtained from the New World," the writer continued.

"Experts may be surprised by the resounding resurgence of inflation, once a lot of money has been distributed compared to productive wealth," the author adds. "Will raising taxes and increasing working hours be enough?" The author asked.

The author concludes his essay by saying that one tends to naively ask: "How much will be paid to confront Corona?" But the good question that will soon impose itself: "Who will pay?" In general, the person who will ask this question is the one who will pay.