Despite the billions of euros the cabinet is investing in combating the impact of coronavirus, ministers do not yet have to put up taxes or make spending cuts, according to a group of leading economists.
The 10 economists, who were talking to ING bank two weeks ahead of the presentation of the 2021 budget, say there is ‘more than enough’ money in the treasury for temporary financial support.
Some, however, do say taxes should be increased or spending cut once the crisis is over, in order to reduce the higher debt ratio. But this should only happen once the economy can stand on its own two feet again, they said.
Some economists also believe it is time for restructuring and a focus on sectors with better long-term prospects, pointing out that the crisis could last for a long time, and will bring lasting changes such as more home working and online shopping.
‘Timing is especially important here,’ said ING chief economist Marieke Blom. ‘If coronavirus is temporary, support packages are also more beneficial to the treasury than paying extra unemployment benefits and rebuilding production capacity and skills afterwards.
‘If the economy has recovered somewhat further, it will also be clearer which services and skills are in demand.’
The OECD said on Thursday that governments have taken unprecedented fiscal action in response to the COVID-19 crisis, but countries will need to support economic recovery in the face of significantly increasing fiscal challenges.
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