Financial packages that a week ago looked big, suddenly look insufficient. Economic measures that seemed like overkill last month now seem too weak to cushion us from the impending crash. That’s how fast coronavirus has changed the economic landscape.
The Irish Government’s plan to cover up to 70 per cent of the wages of employees laid off due to the pandemic is a case in point. This effectively amounts to nationalising part of the private-sector wage bill, something that would have been unthinkable only a few months ago.
But now there are rumblings that even this won't be enough to insulate us sufficiently from the incoming shock. That has prompted calls for even more radical measures, including the most unconventional monetary policy of all – "helicopter money". Instead of the European Central Bank (ECB) endlessly flooding financial markets with billions of euros via quantitative easing (QE), advocates want Frankfurt to pay the cash directly to individuals instead.
They say it’s the only surefire way to deal with the rapid collapse in spending and the knock-on impact on business cashflows brought on by the current shutdown. They also point to the fact that QE merely supports financial markets without addressing the root cause of a slowdown in the real economy and the problem of insolvency that comes with it.
However, former Central Bank governor Patrick Honohan poured cold water on the notion yesterday, suggesting it was a non-runner, from the ECB's perspective at least. "The idea that central banks would mail out a cheque to everyone in Europe is simply not going to happen," he told a web seminar event hosted by the Dublin-based Institute of International and European Affairs.
The European structure was too complex for such an undertaking, he said, and it was not for the ECB to be deciding if "the people in Slovakia should get the same amount as the people in Luxembourg" or if residents should get the same as non-residents. "This is not a matter for a central bank, it would be absorbing powers that politicians need to use and should use wisely," he said.