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Corona World Recession and Health System Crisis: Shocks Not Understood So Far

Author

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  • Paul J.J. Welfens

    (Europäisches Institut für Internationale Wirtschaftsbeziehungen (EIIW))

Abstract

The Coronavirus World Recession is a global symmetric shock that will cause serious problems in both the US and the Eurozone. For the Trump Administration, the lack of qualified staff is a serious issue in the field of international policy coordination and developing adequate anti-coronavirus pandemic strategies. For the first time, US leadership is not visible during a major international economic crisis. In Europe, the Eurozone is facing serious problems as a "Euro Crisis 2" looms: Inflexibility on the part of both Germany and Italy are contributing to new risks, including a potential "Italexit" and a deepening of the coronavirus recession. While a simple Eurobonds approach is not feasible in the Eurozone, an innovative Joint Eurobonds (JEBs) strategy - with partial collateral and a JEBs fund (JEF) outside the institutional framework of the EU - could help to avoid a new Euro Crisis and to bring a faster EU recovery than in the United States; the proposed JEF would operate on the basis of pre-defined menu options from which JEF member countries could choose, with unanimous voting and based on the respective requirements of national parliaments, to give a green light to the new framework approach. Germany, which holds the rotating EU presidency in the second half of 2020, faces enormous responsibility, but is hesitant to give up its traditional resistance against the mutualization of bonds in the EU. The EU's recovery and loan package are unlikely to work as intended - amongst other things, the impact of the European Investment Bank loan package is likely to be much smaller than the European Commission seems to be believe. The suggested JEBs-oriented Quantitative Easing strategy would be consistent with the requirements of the verdict handed down by Germany's Constitutional Court on May 5, 2020 - concerning the European Central Bank's Public Sector Purchase Programme.

Suggested Citation

  • Paul J.J. Welfens, 2020. "Corona World Recession and Health System Crisis: Shocks Not Understood So Far," EIIW Discussion paper disbei273, Universitätsbibliothek Wuppertal, University Library.
    • Handle: RePEc:bwu:eiiwdp:disbei273
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    References listed on IDEAS

    as
    1. Paul J. J. Welfens & Fabian J. Baier, 2018. "BREXIT and Foreign Direct Investment: Key Issues and New Empirical Findings," IJFS, MDPI, vol. 6(2), pages 1-21, April.
    2. Lars Jonung & Werner Roeger, 2006. "The macroeconomic effects of a pandemic in Europe - A model-based assessment," European Economy - Economic Papers 2008 - 2015 251, Directorate General Economic and Financial Affairs (DG ECFIN), European Commission.
    3. Joseph Abadi & Markus Brunnermeier & Yann Koby, 2023. "The Reversal Interest Rate," American Economic Review, American Economic Association, vol. 113(8), pages 2084-2120, August.
    4. Andre Jungmittag & Paul J. J. Welfens, 2020. "EU-US trade post-trump perspectives: TTIP aspects related to foreign direct investment and innovation," International Economics and Economic Policy, Springer, vol. 17(1), pages 259-294, February.
    5. Clive Bell & Maureen Lewis, 2004. "The Economic Implications of Epidemics Old and New," World Economics, World Economics, 1 Ivory Square, Plantation Wharf, London, United Kingdom, SW11 3UE, vol. 5(4), pages 137-174, October.
    6. Paul Welfens & Tony Irawan, 2014. "Transatlantic trade and investment partnership: sectoral and macroeconomic perspectives for Germany, the EU and the US," International Economics and Economic Policy, Springer, vol. 11(3), pages 293-328, September.
    7. Samir Kadiric & Arthur Korus, 2019. "The effects of Brexit on credit spreads: Evidence from UK and Eurozone corporate bond markets," International Economics and Economic Policy, Springer, vol. 16(1), pages 65-102, March.
    8. Paul J. J. Welfens, 2019. "The Global Trump," Springer Books, Springer, number 978-3-030-21784-6, December.
    9. Paul J.J. Welfens, 2011. "Innovations in Macroeconomics," Springer Books, Springer, number 978-3-642-11909-5, December.
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    Cited by:

    1. Paul J. J. Welfens, 2020. "Macroeconomic and health care aspects of the coronavirus epidemic: EU, US and global perspectives," International Economics and Economic Policy, Springer, vol. 17(2), pages 295-362, May.

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    More about this item

    Keywords

    Corona World Recession; US; EU Integration; Health System; Eurobonds; German Constitutional Court;
    All these keywords.

    JEL classification:

    • F00 - International Economics - - General - - - General
    • F02 - International Economics - - General - - - International Economic Order and Integration
    • I18 - Health, Education, and Welfare - - Health - - - Government Policy; Regulation; Public Health

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