I was asked to give some
closing remarks after the discussion and focused on three issues, using two aphorisms:
First, the Spanish philosopher George Santayana is claimed to have coined the oft-repeated phrase: “Those who do
not learn history are doomed to repeat it.” Fiscal policy choices made after the Global Financial Crisis ten years ago set the scene for the Eurozone Debt Crisis. Withdrawing fiscal stimulus, not only in overindebted euro area periphery countries,
but also in core countries, most prominently Germany, exacerbated the crisis substantially. Austerity policies in the UK between 2010 and 2016, criticised by economists both in the UK and the IMF, ultimately resulted in the Brexit referendum vote. It is thus
critical for democracy and socio-economic sustainability that this mistake not be repeated and that fiscal stimulus and support not be withdrawn too quickly. The example set by the new US administration should certainly be an important signal. Mr. Donohoe
was quite defensive when it comes to comparing the European and US fiscal responses to the pandemic and crisis; here I am, however, with Martin Sandbu who pointed to the risks for
Europe of an insufficient stimulus.
Second, the Greek philosopher Heraclitus is claimed to have said: “No man ever steps in the same river twice, for it's not the same river and he's not the same man”.
As much as we have to learn from history, it is important to realise that the current crisis is different from the previous one and the situation of the European economy is different. While in the Global Financial Crisis the financial sector was at the core
of the crisis, this time the financial sector was hit as much as any other part of the economy; however, the financial sector has been critical both as a transmission channel for government support for households and firms during the pandemic and in its post-pandemic
role of reallocating capital. As important, the banking sector might also be faced with a wave of corporate insolvencies as fiscal support is being withdrawn and the question arises whether the bank resolution framework as put in place over the past decade
in Europe will be sufficient to address with the consequent possible bank fragility.