The Irish Times view on Covid-19’s economic impact: Big and rapid response is vital

The extraordinary measures taken in Ireland in response to the coronavirus are entirely necessary on public health grounds – indeed more will need to be done. They will carry a significant cost to the economy and many businesses. This is unavoidable but also requires a significant and rapid public policy response.

As the days pass, the importance of speed in the public health response becomes ever clearer. Just a week ago there was debate over the St Patrick’ s Day parade – now it is self-evident that cancellation was the correct decision.

Following worrying evidence of large gatherings in pubs at the weekend shared on social media, many public houses had already gone ahead and announced their temporary closure.

The subsequent Government decision to ask all pubs and bars to close is sensible, particularly given the lack of personal responsibility shown by a minority.

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The dramatic acceleration of the public health response, now also including unprecedented travel restrictions, will increase the economic disruption, both here and internationally. As in the public health arena, the pace of response is vital here too. Internationally, we have seen central banks respond, with the US Federal Reserve Board, the Bank of England and others cutting interest rates.

The move by the Fed late on Sunday to announce a second interest rate cut and to try to boost liquidity to businesses was particularly striking. The European Central Bank decided not to cut rates last week but joined the other central banks in announcing measures to ease liquidity and help bank lending.

We have also seen the start of responses from governments via budget policy, including higher spending not only on health but also in trying to help affected companies. Even Germany, traditionally conservative on budget management, promised on Friday to loosen the purse strings and seems to be encouraging other countries to do the same. In Ireland,the Government announced a €3 billion spending package, part of it aimed at supporting the incomes of those ill or isolating and also boosting health spending. This will almost certainly push the budget into deficit.

Almost certainly more will be needed – both here and internationally. Economies have suffered a huge demand shock and many businesses will quickly run into trouble. Disruption from large-scale absences from work lies ahead. And there is no certainty on when the worst of this will be over.

Here, the Government’s moves on sick pay and forbearance on VAT and PAYE penalties for SMEs in the short term are welcome. The scale of temporary business closures will be enormous and many others will face a massive fall-off in their cash takings. The challenge for policy is to ensure as many as possible stay in business.

Drawing up these plans and implementing them are a massive job – and resources are not limitless. But to minimise the damage, speed is of the essence.