economy - and - on - monetary - policy - 855 … 5 / 14 12 / 21 / 2020 the potential long - term effects of the coronavirus crisis on the economy and on monetary policy | deutsche bundesbank means of transfers, to give an example. it was ﬁscal policymakers ’ determined and broad intervention that played a substantial role in averting a downward spiral in the economy. it is clear that the provision of ﬁscal support on a massive scale during this crisis was, and still is, the right decision. without this assistance for businesses and households, the economy would probably have experienced a far more severe downturn, which, in the end, would probably have hit government coffers much harder than is already the case. the coronavirus crisis is indeed taking a heavy toll on public ﬁnances. for example, according to the european commission ’ s autumn 2020 economic forecast, the euro area aggregate debt - to - gdp ratio is projected to jump by 16 percentage points this year – to over 100 %. against this backdrop, the government needs to create [UNK] ﬁscal space once the crisis has passed so that it is in a position to overcome these three long - term challenges. crisis measures thus need to be time - limited so that deﬁcits can recede automatically in the post - crisis period. 3 monetary policy 3. 1 monetary policy during the pandemic crisis whilst, on this occasion, it is ﬁscal policymakers who are on the frontlines tackling the economic fallout from the crisis, central banks also have a role to play. given that the economic downturn is adversely affecting the inﬂation outlook, an accommodative monetary policy stance is crucial. additionally, [UNK] liquidity in the ﬁnancial system could further exacerbate the economic downturn and ultimately put the objective of price stability at risk. such being the case, the ecb governing council responded decisively back in march already – with a whole raft of monetary policy measures. these focused on the ecb ’ s bond purchase programmes, in particular, with the governing council not only increasing purchases under the asset purchase programme ( app ), which has been running since 2015, but also launching a pandemic emergency purchase programme, or pepp for short. my fundamental scepticism regarding large - scale government bond purchases is nothing new. in particular, they pose the threat of blurring the line between monetary and ﬁscal policy –

which has been unexpectedly high. when i was at the central bank of ireland, and where i am now, we would still have the same concern, which is : where do you strike a balance between recognising that this is an important source of revenue versus whether it is guaranteed to be here into the future. for any incoming government, having a prudent approach to managing that would be important. you ’ re nine months into the job : what do you think the advantages are for ireland of having the former governor of the central bank here in such a key role at the ecb? what ’ s very interesting about the ecb is that our only focus is on the overall performance of the euro area. the euro area is a very important trade partner for ireland. what is good for the wider euro area would typically be good for ireland. what i can say more generally is that the ecb has staff from everywhere in the eu. it ’ s very interesting to have that diversity. we talked earlier on about savers versus debtors. that ’ s important because that differs across the euro area. some countries have big manufacturing sectors. other countries are more focused on tourism or technology. it differs so much that having staff — and, if you like, the executive board membership — that reflects the diversity of the euro area makes for a very interesting workplace and i think makes for better - quality policymaking. one of the things we ’ ve been very worried about here for quite some time is brexit. what concerns would you have? what concerns at a european level, at the ecb level, are there about brexit? let me make three points on this. one is, as i think it ’ s well understood here : we ’ re in a pause. brexit has happened, but until we know what the new trade deal is going to be, the uncertainty remains. the more quickly a trade deal is concluded the better, because we do think uncertainty in general is holding back the european economy. a second point to make is trade frictions : the more severe the trade frictions, the worse we think the medium - term performance of the uk and european economies will be. but taking the overall european view : the united kingdom is not big enough. it ’ s a big country, but compared with the eu27 it is not big enough to be the driving force for the future of the euro area. of course, it ’ s more important for us