Europe Is Probably in Recession. Can Its Leaders Move Fast and Deliver Relief?

For Europe — as for the rest of the world — this crisis does not appear to be easily influenced by a reduction in interest rates. Italy’s broad quarantine has disrupted production at factories that are major suppliers of parts to the auto industry across Europe, a central threat to the Continent’s economy. These factories will not suddenly roar back to life if the central bank reduces borrowing costs. That will happen only when the threat to public health subsides.

The most meaningful way policymakers can alleviate the economic damage is through fiscal policy, unleashing government money that can help small businesses grapple with a loss of sales while aiding workers who are unable to get to their jobs. Governments could spur spending in a moment when shopping malls, restaurants, concert halls, convention centers and other venues for human interaction are being avoided as transmission zones for a lethal virus.

On Monday, as Europe absorbed the impact of Italy’s decision to cordon off some 16 million people from the rest of civilization, senior European leaders called for targeted government spending.

The Italian prime minister, Giuseppe Conte, promised that his government would deliver “massive shock therapy.” The French finance minister, Bruno Le Maire, said a “massive” economic stimulus was now required to cope with the outbreak.

But, tellingly, Mr. Le Maire told French radio that he planned to discuss an economic stimulus plan with other European officials at a meeting a week later, on March 16 — a seeming eternity in the face of a rapidly spreading outbreak with no discernible boundaries.

Italy gained European approval last week to unleash a 7.5 billion euro (about $8.6 billion) package of spending measures to aid those harmed by the outbreak. But as the virus continued to spread, yielding growing numbers of cases in Germany, France and beyond, the European authorities appeared no closer to tackling the crisis collectively.

Article source: https://www.nytimes.com/2020/03/09/business/europe-recession-coronavirus.html