The Irish Times view: Need for a massive response

The speed and extent of the shock to the world economy from the coronavirus crisis is unprecedented – and so an unprecedented policy response is required. The necessary restrictions on movement, interaction, business and our daily lives is inevitably leading to an extraordinary economic hit. How long this crisis will continue, and what the world will look like when the worst passes, remain worryingly uncertain. While public health is the clear priority, never have the challenges for economic policymakers been more pressing.

Governments and central banks have moved quickly, promising vast sums in extra spending and additional liquidity. Some lessons appear to have been learned from the last financial crisis, when the policy response was too slow and too timid. Yet more may be needed. Saving as many businesses as possible and supporting their staff is vital work. Replacing collapsing private sector demand with public cash is also important.

The ECB, one of the organisations most open to criticism for its response to the financial crisis, has moved more quickly this time. Its promise to purchase up to €750 billion of bonds this year, announced late on Wednesday after an emergency teleconference of its governing council, may calm bond markets for the moment. Yet solidarity in the euro zone is still likely to be tested, with the Italian economy facing massive costs. Much work was done to strengthen the euro zone after the crisis, but weak spots and unfinished business remain – and leaders and the ECB may face further tests in the months ahead.

The ECB's move is also important for Ireland. The cost of the response is rising sharply and it is important that Ireland retains access to the markets at low borrowing costs to fund this. The public finances will inevitably move substantially into deficit this year. Minister for Finance Paschal Donohoe has already announced significantly increased spending to fund the health service and try to protect businesses and their employees hit by the crisis. Difficult decisions lie ahead on how to pay for all this – and what it means for spending and tax in the long term . For now, however, the focus must remain on funding the health service and dealing with the economic fall-out.

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Economic policymakers – as well as those managing businesses – are now flying blind, to the extent that the duration of the current restrictions, and possibly additional ones, remain unclear. The Government’s first job is to protect its citizens as much as its can. Doing so, via widespread restrictions, carries an economic cost in the short term. That is inevitable. The sooner the crisis passes, of course, the sooner the economy can start to recover. Minimising the damage caused in the meantime and stopping the economic crisis spreading further than is necessary is important and difficult work.