Former IMF chief economist Olivier Blanchard proposes a large increase in Italy's debt ratio to cushion the large economic and fiscal costs of the coronavirus crisis.
The Italian government is behaving responsibly in the face of its crisis. But its commitment to combat the coronavirus epidemic will have large economic and fiscal costs. A large increase in the debt ratio does not put debt sustainability into question, however. ECB intervention requires the agreement both of Italy and of all euro members. Italy may be reluctant to accept the conditionality from such intervention. The last thing the world needs is another euro crisis. The ECB should and can avoid it.
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© Peter G Peterson Institute for International Economics
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