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The Corona Crisis

In: The Economics of Target Balances

Author

Listed:
  • Hans-Werner Sinn

    (Ludwig Maximilian University)

Abstract

From March 2020 onwards the effects of tiering were soon overlaid by the Corona crisis. As Italy, whose economy was in trouble anyway, was also the first country of the western world to be affected by the pandemic, capital fled in droves. The capital flight went largely to Germany and caused the largest monthly change in Germany’s Target balances ever since the outset of the Eurozone. Reacting to the crisis, huge fiscal and monetary rescue operations were set in place. If the crisis continues, the liquidity may flow back to Europe’s seemingly safe havens in the north as has typically been the case throughout the euro crisis. The fiscal rescue funds would then have no significant effect on the Target balances of the Mediterranean countries as inflows and outflows would balance out, but the monetary rescue operations enabling NCBs to issue more liquidity would increase their Target debts.

Suggested Citation

  • Hans-Werner Sinn, 2020. "The Corona Crisis," Springer Books, in: The Economics of Target Balances, chapter 0, pages 93-99, Springer.
    • Handle: RePEc:spr:sprchp:978-3-030-50170-9_11
    DOI: 10.1007/978-3-030-50170-9_11
    as

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