13 conditions to be fulfilled to see the light at the end of the COVID-19 tunnel
It is not easy to design a configuration of events that is not uniformly bleak. I have tried nonetheless. This configuration would result from the following 13 conditions. I don’t dare putting a probability on it.
- The “suppression strategies” work and Italy, and with a lag the rest of Europe, follow the same path as China and Korea (Japan?) and bring under control the first wave of infections
- The US wakes up und learns from the experience of countries that went ahead of it into the infection, adopts a suppression strategy and follows Europe in bringing the first wave under control
- An effective cure, attenuating the consequences of the infections (e.g. reducing the need of intensive care and/or the number of needed hospitalization days), comes at the same time that suppression strategies have shown their (temporary) effectiveness
- Acquired immunity is much larger than measured by the number of infected and recovered individuals (without reaching the difficult to believe very high numbers in the upper case of the Oxford Report – https://www.medrxiv.org/content/10.1101/2020.03.24.20042291v1.full.pdf+html)
- A selective relaxation of the lockdowns can be designed and implemented by means of more extensive testing (https://t.co/kVCjdTDZYP?amp=1), selective quarantining (https://voxeu.org/article/transition-steps-stop-covid-19-without-killing-world-economy), AI applications and other smart tools
- Because of 4 and 5, a second wave of infection is avoided and we can bridge over to the time when vaccination will be available
- The tide of infections hits Africa, Latin America and Asia ex China only after an effective attenuating cure, as in point 3, has been found
- Fiscal policies support health systems dealing with a much heavier burden and confine economic damage to the flows (GDP), while protecting the stock of productive (mostly intangible) capital, so that production can quickly return to pre-crisis level
- Monetary policy assists fiscal policies and helps banks support firms and individuals, bridging over sharp liquidity needs.
In the €-area in particular:
- EU countries coordinate their sanitary actions, also in view of re-establishing free movement of people and goods within the Union
- The €-area launches a joint fiscal action that exploits the current and possibly future easing actions of the ECB
- More specifically, the European Council establishes a temporary fiscal framework to deal with the crisis, the Commission and the Euro-group jointly act as emergency euro area treasury minister distributing resources and giving guidelines and instructions to national governments on how to use them, the European Stability Mechanism (ESM) acts, only for the purpose to deal with the COVID-19 crisis, as the Euro-area debt office and raises the necessary funds
- The ECB substantially increases the share of ESM bonds bought under the extended QE program.