The Resurrection

When Will Germany Begin Loosening Coronavirus Restrictions?

All of Germany is looking forward to Easter this year, with hopes that the government will soon be able to loosen coronavirus restrictions. But will it? And if so, which ones? By DER SPIEGEL Staff

By Lukas Eberle, Jan Friedmann, Christoph Hickmann, Martin Knobbe, Julia Koch, Peter Müller, Cornelia Schmergal, Gerald Traufetter and Steffen Winter

A lone cyclist in front of the Brandenburg Gate in Berlin: When can lockdown measures be loosened?
A lone cyclist in front of the Brandenburg Gate in Berlin: When can lockdown measures be loosened? Kay Nietfeld/ DPA

Easter is a variable holiday, at least when it comes to the day it is celebrated. It sometimes falls at the end of March, sometimes in early April and occasionally even later than that. This year, though, it falls on this Sunday -- and the entire country is looking forward to it.

It is a bit of a paradox: The churches will be empty, since services are still prohibited because of the coronavirus. Yet Easter this year is meaningful for everybody in the country -- for Christians, Muslims, Jews, atheists, agnostics, schoolchildren, ice-cream vendors and CEOs alike. Because after Easter, the decision will be made as to what happens next in Germany.

As things currently stand, yet another of those innumerable video conferences is planned for next Wednesday, with Chancellor Angela Merkel discussing the next steps in combatting the COVID-19 crisis with state governors from around the country. But all signs point to the meeting being anything but ordinary. It will focus on whether it is time to begin loosening the measures that have brought public life to a standstill -- measures that have pushed many people to desperation and the economy into recession. It will focus on whether a hint of freedom, or normalcy, can be reintroduced.

For Christians, Easter is the festival of resurrection. And this year, the entire country is hoping for resurrection. For a way out of the standstill.

In the past several weeks, it has frequently been said that the country is being governed by experts. It's almost as though the virologists have the power, along with, to a certain extent, the economists. But that's not entirely accurate, as the pre-Easter anticipation has demonstrated. It's not the scientists who will make the decision about returning to some semblance of normalcy, but the politicians. Only they have the power to do so.

It will likely be one of the most meaningful political decisions made in recent times. The supplementary budget of over 156 billion euros ($171 billion) that the German parliament recently passed, of course, was also a momentous decision, at least financially.

But there is a huge amount riding on the question as to when and how the country can be gradually powered up again -- things like the mood in society and the economy, whether there will once again be room for plans, for optimism, for investments. Whether the light at the end of the tunnel is approaching, or whether the tunnel takes another turn.

There is a lot to consider, first and foremost the number of future infections and deaths, but also the number of unemployed. Another important factor, though, is also the mood in the country, its psychological state. It is a decision that requires instinct, intuition and the courage to take risks -- essentially those qualities that tend to distinguish politics from science.

How do politicians prepare to make such a decision? Who is advising them, what factors are they considering and how much pressure are they under? Is there already a rough outline of the decision that might be made?

Pressure from the Neighbors

Markus Söder, the governor of Bavaria, has a problem. Or, rather, two of them. And this despite things having looked so good for him for so long.

Söder, 53, has thus far played the role of decisive crisis manager in the coronavirus pandemic. But currently -- and this is his first problem -- Bavaria is number one in a category that Söder would be more than happy to give up leadership: Bavaria currently has the most confirmed cases of COVID-19 of any state in Germany, and the most fatalities.

That is primarily a function of Bavaria's geographic location, specifically its proximity to Italy and Austria. And in the Austrian capital of Vienna is Söder's second problem: the country's chancellor, Sebastian Kurz.

Kurz this week presented a plan for leading his country out of its current lockdown. Starting on April 14, just after Easter, small shops will be allowed to reopen, followed in May by all shopping centers and hairdressers. It was Kurz, it must be recalled, who demonstrated to German conservatives how to breathe new life into a stagnant big-tent party, and now he is showing them how an exit from the corona lockdown might look. Other countries, such as Denmark, have also already initiated first steps toward loosening isolation measures.

The push from Austria caused ears to perk up around Germany, but it heaped additional pressure on its direct neighbors in Bavaria -- and on Söder in particular. There were immediate calls from the opposition Free Democrats (FDP) for the presentation of an exit timeline.

It is almost reassuring just how reliable political reflexes remain even in a crisis of the magnitude of this one. Ultimately, crisis politics are power politics. And nobody knows that better than Söder, whose crisis management has even led some to argue that he would make a good chancellor.

But thanks to Kurz, Söder is no longer in the role of proactive leader, but that of reactive killjoy. He is skeptical of prematurely loosening lockdown measures and has pointed out that Austria is three weeks ahead of Bavaria when it comes to the course of the pandemic. "We must remain careful and vigilant," he warned just before Easter. "If we can steadily persevere, we increase our chances of success in the period that follows."

Pressure from Experts

Armin Laschet, governor of the German state of North Rhine-Westphalia, has suffered significantly under Söder's crisis management in Bavaria. The more decisive the Bavarian governor has acted, the more hesitant his counterpart in North Rhine-Westphalia has seemed.

And that is a problem, given Laschet's ambitions of taking over the leadership of the Christian Democratic Union (CDU) and becoming the conservative candidate for chancellor in next year's election. Against that backdrop, indecision is not a good look.

That, at least, was the initial impression. Since then, though, Laschet, 59, has managed to find an appropriate role in the crisis -- that of the eager student.

He has assembled a sizeable team of consultants to address the pandemic and named the 12-person group the "Corona Expert Council." The sociologist Armin Nassehi is on the council, as is former German high court justice Udo Di Fabio and Deutsche Telekom executive Claudia Nemat. The group also includes psychologists, demographers and representatives from social services agencies.

By comparison, Thuringia Governor Bodo Ramelow prefers to rely on just three advisers. But Thuringia is quite a bit smaller than North Rhine-Westphalia. Laschet's state isn't just the most populous in Germany, but also the strongest economically. His decisions are important for the entire country.

Thus far, the Expert Council has met in three video conferences, with more such gatherings planned. Laschet plays the role of moderator, sitting at his desk in the state capital staring at a huge computer screen, a glass of cola next to him. He asks follow-up questions and takes careful notes.
Participants say the meetings focus on economic data in addition to statistics pertaining to panic-buying and to domestic violence. They say that Laschet has been advised to no longer speak of an "exit" from the lockdown measures, since it sounds too dark. Instead, Laschet now speaks of "reentry."

One of those who will have a significant influence over the decisions Laschet takes is the Bonn-based virologist Hendrik Streeck, 42. He is also part of the Expert Council and has essentially become Laschet's chief adviser in the crisis. Currently, Streeck is leading a study in Heinsberg, the area of Germany with the highest percentage of COVID-19 infections.

One of the goals of the study is to figure out how large the number of unreported cases is -- how many people have unknowingly become infected with the virus. Initial results from the study, financed by the state government, were presented on Thursday. In one community in the study area, an infection rate of 15 percent was found, far higher than the 5 percent previously assumed.

"Pardon me," the professor says when reached by phone, chewing into the mouthpiece. He says he has to eat something before he collapses, understandable given the stress he is under. Laschet wants to have concrete numbers at hand when he begins discussion of "reentry" measures with the chancellor and the other state governors.

"We can't say precisely what each particular measure has actually achieved," Streeck says.

"But we can deliver so-called important indicators. We are looking at the transmission of the virus in families. Should it become clear, for example, that children are less likely to get sick from the virus, that could be an indicator that reopening schools might be possible."

Health Minister Jens Spahn and Chancellor Angela Merkel prior to the corona crisis: "It is important that we remain vigilant." Axel Schmidt/ REUTERS

Streeck and his team members are visiting homes and apartments, examining door handles and remote controls to determine where the virus can be found. They are trying to learn why some people end up in intensive care and why some die. These are basic questions to which answers must quickly be found. Most scientists hate rushed research. But there isn't much of a choice at the moment.

"Many politicians have an idea of what the next steps might look like," says Streeck. "Armin Laschet will be one of the few who can refer to scientific data."

Pressure from the Infection Curve

At midday last Tuesday, German Health Minister Jens Spahn displayed a rare moment of public emotion. He was sitting in front of an ice-blue wall displaying the Baden-Württemberg coat-of-arms and had a somber look on his face as he discussed Easter weekend.

Spahn, 39, had come to Stuttgart for a meeting with Governor Winfried Kretschmann. "It is also difficult for me to refrain from visiting my parents this weekend. But it is important that we remain vigilant."

The minister usually avoids making any references to his private life, but he wanted to send a message. Easter weekend will play a decisive role in deciding whether it is time to begin returning to normalcy.

The curve of new infections is flattening out, but when it comes to serious cases, Spahn is concerned that an initial "peak" is still to come. In many regions, Easter will likely provide a first answer to a life-or-death question: Does Germany have enough ventilators available for COVID-19 patients? The answer is crucial for Spahn.

To find it, the Health Ministry monitors one particular group of numbers on a daily basis. It can be found in a nationwide platform called DIVI, an online register of available ventilators. Spahn has issued a decree requiring all clinics to report unused capacity.

The second decisive number for Spahn is provided by the Robert Koch Institute (RKI), Germany's answer to the Centers of Disease Control in the U.S. The so-called "reproductive number," referred to simply as the RO by experts, indicates how many people a COVID-19 patient infects. "That is the number that is extremely relevant to us," says RKI head Lothar Wieler.

At the beginning of the epidemic, the number was around three. On Wednesday, it was around 1.2, dropping then to 1.1 on Thursday. The stated goal is that of getting it permanently under one, which would mean that the pandemic was subsiding and the point at which a gradual loosening of measures could be considered.

It is now, in other words, up to DIVI and RO to determine when people can start looking forward to an evening in the beer garden or a visit to their families. And ultimately it is up to Spahn to consider the numbers, produce a recommendation and make a decision. To do so, he is relying on two guiding questions. The first: What is least expendable? Where must we take the first steps back to normality? He counts the ability to make a living in that category. The second question: What things are easiest to do without? Spahn's answer: "Festivals, going to clubs, things like fairs and carinvals."

Pressure from the Economy

The largest concerns are reserved for the business world, and that is the territory of Economy Minister Peter Altmaier. Of all people.

More than almost any economy minister before him, Altmaier has recently been in the crosshairs of companies and the industry trade groups to which they belong. Germany's mid-sized companies have been particularly disenchanted in the last year, but so too has the Federation of German Industries (BDI) and the Confederation of German Employers' Associations (BDA). And now it is up to Altmaier to save German companies?

Suddenly, they all want money from him. The KfW, Germany's state-owned development bank, has already received 7,500 applications for loans amounting to 20 billion euros, with the number climbing steadily. Altmaier is currently holding two video conferences a week with all association representatives -- and they are overwhelming him with new requests. More than anything, though, they are asking the same question over and over: When will the restrictions on public life finally be lifted?

Altmaier knows that May will be the decisive month. If things don't start looking up for companies by then, the problems will become so large that they can no longer be managed. Altmaier's deputies are watching with concern the slow pace of preparations for easing restrictions. And because nobody likes to bear the blame alone, they have found a favorite target for their frustrations: the Health Ministry, led by Altmaier's party ally, Jens Spahn.

Germans have largely taken the social distancing measures to heart, but politicians are worried about lifting them too soon. Christoph Soeder/ DPA

There are two areas where Altmaier's staff feel their counterparts in the Health Ministry are wanting.

For one, protective face masks. A precondition for lifting restrictions after Easter is the presence of sufficient masks -- several million of them each day. Companies will need huge numbers of masks if they are to restart production -- for workers on the factory floor, for example.

The Health Ministry has taken the lead on the issue, which has ruffled feathers in the Economy Ministry, where staff point out that failures to order enough masks in January and February can hardly be made up for now. A team under the leadership of the Economy Ministry has now been tasked with expanding mask production in Germany. Spahn remains responsible for obtaining masks from abroad.

The second area is the development of the app that could warn people if they had contact with someone later identified as corona-positive. Here, too, the health minister is responsible, and here, too, things are not going as planned. Taken together, people in the Economy Ministry worry, the problems could have a toxic effect on an already plummeting economy. If initial steps aren't taken to ease measures after Easter, then things will likely get even darker, Economy Ministry staff argues. Their message: It wouldn't be our fault.

But after Easter -- on Wednesday, to be precise -- Spahn and Altmaier will be part of the same conference. Together with the woman who will ultimately have to bear responsibility.

What the Path Ahead Might Look Like

The lives of Angela Merkel and her chief of staff, Helge Braun, consist these days of video conferences, text messages and more video conferences. There are constant meetings with state governors, cabinet members, business leaders, European neighbors, the European Commission in Brussels and with government leaders from around the world. And then there are the scientists with all of their recommendations.

Merkel has recently been a decent barometer of just how quickly some experts have changed their minds at times during this crisis. The chancellor was initially opposed to early school closures, but rapidly reversed course when virologist Christian Drosten, a leading scientific adviser to the government, changed his mind virtually overnight.

It wasn't the only area where the government corrected its course. Just over a week ago, the government was skeptical of the efficacy of recommending face masks for the public at large.

But on Monday, Merkel said that expert opinion on masks was changing, "and we won't stand in the way." And indeed, masks are likely to play a significant role when the government does announce measures to loosen restrictions. "Why do you think the chancellor is pushing so hard for their acquisition," says one cabinet member.

To get an idea of the direction things might go next week, it is helpful to take a look at Halle. The city is home to the Leopoldina, an almost 370-year-old research collective with 1,610 members. More importantly, it is an institute that Merkel trusts. What they say carries weight in the Chancellery.

The institute has long in the business of advising politicians and they recently established an 18-member working group focusing specifically on the coronavirus pandemic. They hold video conferences once or twice a week, sometimes more, and have already produced two "ad-hoc expert opinions" on fighting the disease. The third is expected early next week. It will likely play a significant role in whether Merkel will propose measures to ease the restrictions. And if so, which ones.

The scientists are still struggling to arrive at a consensus, but everyone knows that time is short.

"Things that normally take half a year are now happening in just one or two weeks," says one of the researchers involved in the process. "It's clear that the current situation has to come to an end. Step-by-step, to be sure, but we have to start so that the economy stays alive."

And the first steps are taking shape. If it were entirely up to the research collective, then the first schoolchildren could start going back to school in coming weeks -- though at first just the older ones, since they can be trusted to deal appropriately with face masks and to observe social distancing regulations. "Kindergarten children can't do that," says the Leopoldina researcher, which is why there is general agreement that the younger ones should remain at home for the time being.

The next question: Can shops begin reopening after the Easter holidays? The answer depends largely on the availability of masks. The experts at the Leopoldina are convinced that a return to normal life can only succeed if sufficient anti-infection measures are taken -- which include the wearing of masks that cover nose and mouth. "Masks have to become standard in public life," says the Leopoldina researcher. "They have to become the new cool."

And then there are the tests. For quite some time, there has been consensus among politicians and scientists that the number of tests must be increased to get a more precise picture of the spread of the disease.

In other words, the framework for the Wednesday after Easter has been established and the first ideas are circulating. Yet the chancellor has nevertheless refrained from making any public statements about possible steps toward easing restrictions. When North Rhine-Westphalian Governor Armin Laschet recently demanded that the debate over loosening measures be held publicly, Merkel said nothing at all in response. It is just as it has always been: She would prefer saying too little than risk saying too much. And this time, she is driven by one fear in particular.

The chancellor was worried that if the government had begun holding a public debate before Easter, it could have caused some confusion and been seen as a signal that social distancing measures didn't have to be taken all that seriously anymore. But the statistics don't yet look quite good enough for such a conclusion. The curve in Germany hasn't yet flattened to the degree it has in Austria, for example, where the number of confirmed infections is currently doubling only every four weeks. In Germany, they are still doubling every two weeks.

Merkel has been keeping a close eye on those differences. She is afraid of loosening measures too quickly and too broadly -- and then facing a situation in which some of the measures will have to be re-imposed. That would make it look as though the government didn't completely have things under control -- and in the worst case, it could lead to a sudden strong increase in the number of infections and fatalities. In crises such as this one, it is better to have a frustrated public than a confused one.

On Thursday, the chancellor said there was "cause for cautious optimism," but it wasn't yet time to "presume we are safe." She warned that we have to be wary of "very quickly destroying what we have achieved." The pandemic, she said, will not go away "before we have a vaccine." On the eve of Easter, her comments sounded quite a bit more guarded than those from Laschet, who has repeatedly demanded a discussion about an end to the precautionary measures.

But the dangers of prematurely striking a relaxed tone became immediately apparent to European Commission President Ursula von der Leyen on Tuesday. During a meeting with EU ambassadors from member states, Commission officials indicated that the EU executive would be issuing proposals for a European exit strategy the very next day. The result was a not insignificant uproar.

Representatives of several countries complained to von der Leyen and her officials, saying that for as long as some countries were still in the middle of the fight against the deadly outbreak, the time wasn't right to talk about taking steps toward normalcy.

But in Germany?

The pressure is high. Thus far, people have been relatively disciplined in doing what has been asked of them. Conditions such as those seen here in recent weeks would have been considered inconceivable just a short time ago. And measures restricting freedoms cannot be kept in place for long in a democratic society.

The government in Berlin is fully aware of that, but is nevertheless seeking to temper hopes.

Under no circumstances, says the cabinet member, can Germany expect "the all-clear" in the week following Easter. If steps toward lifting restrictions are taken, the cabinet member said, it will be a "small packet" of measures. One step at a time.

What does that exactly mean? Officials are currently looking at specific sectors, says the cabinet member, with the focus on determining the conditions under which work can begin again. "I could imagine, for example, that hairdressers with sufficient protective measures and a limitation on the number of people allowed inside could be allowed to open their doors again."

Every crisis has its symbol. Perhaps this time around, the symbol of hope will be a decent haircut. It would be a start. And it has to start somewhere.

Everything’s under control

The state in the time of covid-19

Big government is needed to fight the pandemic. What matters is how it shrinks back again afterwards

In just a few weeks a virus a ten-thousandth of a millimetre in diameter has transformed Western democracies. States have shut down businesses and sealed people indoors. They have promised trillions of dollars to keep the economy on life support.

If South Korea and Singapore are a guide, medical and electronic privacy are about to be cast aside. It is the most dramatic extension of state power since the second world war.

One taboo after another has been broken. Not just in the threat of fines or prison for ordinary people doing ordinary things, but also in the size and scope of the government’s role in the economy.

In America Congress is poised to pass a package worth almost $2trn, 10% of gdp, twice what was promised in 2007-09. Credit guarantees by Britain, France and other countries are worth 15% of gdp. Central banks are printing money and using it to buy assets they used to spurn. For a while, at least, governments are seeking to ban bankruptcy.

For believers in limited government and open markets, covid-19 poses a problem. The state must act decisively. But history suggests that after crises the state does not give up all the ground it has taken. Today that has implications not just for the economy, but also for the surveillance of individuals.

It is no accident that the state grows during crises. Governments might have stumbled in the pandemic, but they alone can coerce and mobilise vast resources rapidly. Today they are needed to enforce business closures and isolation to stop the virus. Only they can help offset the resulting economic collapse. In America and the euro area gdp could drop by 5-10% year-on-year, perhaps more.

One reason the state’s role has changed so rapidly is that covid-19 spreads like wildfire. In less than four months it has gone from a market in Wuhan to almost every country in the world. The past week logged 253,000 new cases. People are scared of the example of Italy, where almost 74,000 recorded cases have overwhelmed a world-class health system, leading to over 7,500 deaths.

That fear is the other reason for rapid change. When Britain’s government tried to hang back so as to minimise state interference, it was accused of doing too little, too late. France, by contrast, passed a law this week giving the government the power not just to control people’s movements, but also to manage prices and requisition goods. During the crisis its president, Emmanuel Macron, has seen his approval ratings soar.

In most of the world the state has so far responded to covid-19 with a mix of coercion and economic heft. As the pandemic proceeds, it is also likely to exploit its unique power to monitor people using their data. Hong Kong uses apps on phones that show where you are in order to enforce quarantines.

China has a passporting system to record who is safe to be out. Phone data help modellers predict the spread of the disease. And if a government suppresses covid-19, as China has, it will need to prevent a second wave among the many who are still susceptible, by pouncing on every new cluster. South Korea says that automatically tracing the contacts of fresh infections, using mobile technology, gets results in ten minutes instead of 24 hours.

This vast increase in state power has taken place with almost no time for debate. Some will reassure themselves that it is just temporary and that it will leave almost no mark, as with Spanish flu a century ago. However, the scale of the response makes covid-19 more like a war or the Depression. And here the record suggests that crises lead to a permanently bigger state with many more powers and responsibilities and the taxes to pay for them. The welfare state, income tax, nationalisation, all grew out of conflict and crisis (see article).

As that list suggests, some of today’s changes will be desirable. It would be good if governments were better prepared for the next pandemic; so, too, if they invested in public health, including in America, where reform is badly needed. Some countries need decent sick pay.

Other changes may be less clear-cut, but will be hard to undo because they were backed by powerful constituencies even before the pandemic. One example is the further unpicking of the euro-zone pact that is supposed to impose discipline on the member-states’ borrowing. Likewise, Britain has taken its railways under state control—a step that is supposed to be temporary but which may never be retracted.

More worrying is the spread of bad habits. Governments may retreat into autarky. Some fear running out of the ingredients for medicines, many of which are made in China. Russia has imposed a temporary ban on exporting grain. Industrialists and politicians have lost trust in supply chains. It is but a small step from there to long-term state support for the national champions that will have just been bailed out by taxpayers.

Trade’s prospects are already dim (see article); all this would further cloud them—and the recovery. And in the long term, a vast and lasting expansion of the state together with dramatically higher public debt (see article) is likely to lead to a lumbering, less dynamic kind of capitalism.

But that is not the biggest problem. The greater worries lie elsewhere, in the abuse of office and the threats to freedom. Some politicians are already making power grabs, as in Hungary, where the government is seeking an indefinite state of emergency. Israel’s prime minister, Binyamin Netanyahu, appears to see the crisis as a chance to evade a trial for corruption.

The most worrying is the dissemination of intrusive surveillance. Invasive data collection and processing will spread because it offers a real edge in managing the disease. But they also require the state to have routine access to citizens’ medical and electronic records.

The temptation will be to use surveillance after the pandemic, much as anti-terror legislation was extended after 9/11. This might start with tracing tb cases or drug dealers. Nobody knows where it would end, especially if, having dealt with covid-19, surveillance-mad China is seen as a model.

Surveillance may well be needed to cope with covid-19. Rules with sunset clauses and scrutiny built in can help stop it at that. But the main defence against the overmighty state, in tech and the economy, will be citizens themselves. They must remember that a pandemic government is not fit for everyday life.

Draghi: we face a war against coronavirus and must mobilise accordingly

Higher public debt levels will become an economic feature and be accompanied by private debt cancellation

Mario Draghi

© FT montage; Bloomberg; Getty Images

The coronavirus pandemic is a human tragedy of potentially biblical proportions. Many today are living in fear of their lives or mourning their loved ones. The actions being taken by governments to prevent our health systems from being overwhelmed are brave and necessary.

They must be supported.

But those actions also come with a huge and unavoidable economic cost. While many face a loss of life, a great many more face a loss of livelihood. Day by day, the economic news is worsening.

Companies face a loss of income across the whole economy. A great many are already downsizing and laying off workers. A deep recession is inevitable.

The challenge we face is how to act with sufficient strength and speed to prevent the recession from morphing into a prolonged depression, made deeper by a plethora of defaults leaving irreversible damage. It is already clear that the answer must involve a significant increase in public debt.

The loss of income incurred by the private sector — and any debt raised to fill the gap — must eventually be absorbed, wholly or in part, on to government balance sheets. Much higher public debt levels will become a permanent feature of our economies and will be accompanied by private debt cancellation.

It is the proper role of the state to deploy its balance sheet to protect citizens and the economy against shocks that the private sector is not responsible for and cannot absorb. States have always done so in the face of national emergencies. Wars — the most relevant precedent — were financed by increases in public debt.

During the first world war, in Italy and Germany between 6 and 15 per cent of war spending in real terms was financed from taxes. In Austria-Hungary, Russia and France, none of the continuing costs of the war were paid out of taxes.

Everywhere, the tax base was eroded by war damage and conscription. Today, it is by the pandemic’s human distress and the shutdown.

The key question is not whether but how the state should put its balance sheet to good use. The priority must not only be providing basic income for those who lose their jobs. We must protect people from losing their jobs in the first place.

If we do not, we will emerge from this crisis with permanently lower employment and capacity, as families and companies struggle to repair their balance sheets and rebuild net assets.

Employment and unemployment subsidies and the postponement of taxes are important steps that have already been introduced by many governments. But protecting employment and productive capacity at a time of dramatic income loss requires immediate liquidity support.

This is essential for all businesses to cover their operating expenses during the crisis, be they large corporations or even more so small and medium-sized enterprises and self-employed entrepreneurs. Several governments have already introduced welcome measures to channel liquidity to struggling businesses. But a more comprehensive approach is needed.
While different European countries have varying financial and industrial structures, the only effective way to reach immediately into every crack of the economy is to fully mobilise their entire financial systems: bond markets, mostly for large corporates, banking systems and in some countries even the postal system for everybody else.

And it has to be done immediately, avoiding bureaucratic delays. Banks in particular extend across the entire economy and can create money instantly by allowing overdrafts or opening credit facilities.

Banks must rapidly lend funds at zero cost to companies prepared to save jobs. Since in this way they are becoming a vehicle for public policy, the capital they need to perform this task must be provided by the government in the form of state guarantees on all additional overdrafts or loans.

Neither regulation nor collateral rules should stand in the way of creating all the space needed in bank balance sheets for this purpose. Furthermore, the cost of these guarantees should not be based on the credit risk of the company that receives them, but should be zero regardless of the cost of funding of the government that issues them.

Companies, however, will not draw on liquidity support simply because credit is cheap. In some cases, for example businesses with an order backlog, their losses may be recoverable and then they will repay debt. In other sectors, this will probably not be the case.

Such companies may still be able to absorb this crisis for a short period of time and raise debt to keep their staff in work. But their accumulated losses risk impairing their ability to invest afterwards. And, were the virus outbreak and associated lockdowns to last, they could realistically remain in business only if the debt raised to keep people employed during that time were eventually cancelled.

Either governments compensate borrowers for their expenses, or those borrowers will fail and the guarantee will be made good by the government. If moral hazard can be contained, the former is better for the economy. The second route is likely to be less costly for the budget.

Both cases will lead to governments absorbing a large share of the income loss caused by the shutdown, if jobs and capacity are to be protected.

Public debt levels will have increased. But the alternative — a permanent destruction of productive capacity and therefore of the fiscal base — would be much more damaging to the economy and eventually to government credit. We must also remember that given the present and probable future levels of interest rates, such an increase in government debt will not add to its servicing costs.

In some respects, Europe is well equipped to deal with this extraordinary shock. It has a granular financial structure able to channel funds to every part of the economy that needs it. It has a strong public sector able to co-ordinate a rapid policy response. Speed is absolutely essential for effectiveness.

Faced with unforeseen circumstances, a change of mindset is as necessary in this crisis as it would be in times of war. The shock we are facing is not cyclical. The loss of income is not the fault of any of those who suffer from it. The cost of hesitation may be irreversible. The memory of the sufferings of Europeans in the 1920s is enough of a cautionary tale.

The speed of the deterioration of private balance sheets — caused by an economic shutdown that is both inevitable and desirable — must be met by equal speed in deploying government balance sheets, mobilising banks and, as Europeans, supporting each other in the pursuit of what is evidently a common cause.

The writer is a former president of the European Central Bank

Arab Perspectives on the Coronavirus

By: Hilal Khashan

The coronavirus has stunned a disbelieving world. By the time we understood the gravity of the situation, it had already become a pandemic. The Arab world is as guilty as any other region in underestimating the threat.

Except for wealthy Gulf Cooperation Council states that responded reasonably quickly, most Arab governments seemed to hope that the crisis would resolve itself on its own. Clearly, it hasn’t.

But differences in the reactions among Arab governments, religious officials and the public bring into relief some of the issues that undergird Arab society.

In addition to curtailing air and ground traffic, belated state measures to contain the virus included curfews, social distancing, the suspension of economic and bureaucratic operations and the closure of schools, universities and places of worship.

Saudi Arabia closed Islam’s holiest sites in Mecca and Medina, and the Assembly of Catholic Ordinaries of the Holy Land shut down the Church of the Holy Sepulcher in Jerusalem. Arab officials were hesitant to adopt such stringent measures, of course, because they knew how poorly the public would receive it.

COVID-19: Select Arab Countries

Examples of mishandling abound. In February, when the Lebanese media pressed the minister of health about why he had not suspended flights from Tehran to Beirut, he admitted that the decision was political, clearly because of Hezbollah’s veto.

Unaware of the nature of the virus, he assured the public that Lebanon had the vaccine for it.

When the virus spread in China, the Egyptian minister of health visited Beijing in a show of solidarity instead of taking measures to prevent its spread to Egypt.

In Syria, the government opted for denial as the best option to combat it. The police in Damascus arrested a physician because he reported the first positive COVID-19 case in his hospital.

He had to rescind the announcement as a misdiagnosis. The Ministry of Health told hospitals to report deaths from the virus as cases of acute pneumonia or advanced pulmonary tuberculosis.

Iraqi Shiite leader Muqtada al-Sadr, some of whose followers believe his dress has curative powers, said he opposed the use of U.S drugs to fight the virus and accused President Donald Trump of spreading the disease among his enemies.

The religious establishment in all Arab countries failed to urge the ruling elite to take immediate action to contain the spread of the virus. Religious leaders didn’t demand the closures of holy sites, but they defended the governments’ decisions immediately after the fact. Some mosques, particularly in Iraq and Lebanon, ignored government calls to close their doors.

Others kept their outer gates open to allow worshippers to participate in congregational prayers and made sure to cover the floor with rugs for their convenience. Some clerics proposed that worshippers maintain one meter of distance between each other and isolated those suspected of carrying the virus in a separate prayer room.

Muslim clerics neglected to present the virus in life-or-death terms, as they often do during times of crisis, partly because of al-Jabr, one of the seven articles of Islamic belief that emphasizes divine predestination.

The concept submits that man does not possess free will and that God determines the fate of human life. There is, moreover, a complete absence of jurisprudence of foresight and expectation. Religious scholars, especially Sunni scholars, continue to search for edicts dating back to the formative years of Islam. Unfortunately, they live in the present with the mentality of the past. Many people, including clerics, have no clue about the virus and how it is transmitted.

They even claim that what you don’t see doesn’t exist. Some clerics want the virus to afflict a loved one to validate its existence. When they do concede to reality, they claim that God afflicts whoever he wills to test their faith. Religious scholars who oppose closing mosques argue that preserving the faith has priority over safeguarding an individual’s health or life.

Hanbalism, the most austere school of Sunni jurisprudence that gave rise to Salafism, advocates the literal interpretation of religion and ascribes human qualities to God. Abdul-Aziz bin Baz, the late Grand Mufti of Saudi Arabia, even ruled that the earth is flat and the sun revolves around it. Most clerics in the Arab world are either government employees or the product of the oil boom in the 1970s and massive Saudi spending to spread Wahhabism and Salafism to appease its powerful religious establishment.

Practicing Muslims believe that congregational prayers are more spiritually rewarding than praying alone; the more participants, the better. Prayers attract worshippers because of the widespread belief that God’s watchful providence covers their participants. Traditional Muslims believe that God is their protector, and nothing could happen to them that he did not ordain.

Had Arab governments left people to their own devices, mosques would still attract large crowds of worshippers. In popular Islam, mosques are both spiritual edifices and healing places. Plagues and diseases caused by sins can be cured by praying in mosques. They accept that one can catch the virus in a mosque. In this case, it is because God has willed it so and, therefore, there is no escape from it.

It is a time-honored practice for congregational worshippers to exchange handshakes and hugs after the end of the prayer. During prayer, they kneel on carpets, potentially carrying pathogenic bacteria and viruses. Christians tend to display similar behavior. In one Lebanese Maronite Christian church, the faithful refused hand communion and insisted on receiving communion on the tongue in defiance of the mandatory decree by the church to prevent the spread of the virus.

Traditional and poorly educated people, especially if their knowledge about Islam is superficial, fall victim to religious fatalism and lead a life of cultural apathy. Many people exhibit a reckless disregard for government coronavirus awareness campaigns and warnings against public gatherings.

On Beirut’s waterfront corniche that attracts strollers and joggers from all walks of life, the municipal police had to intervene and disperse crowds after the spread of the virus. Similar scenes took place in Baghdad, Algiers, Khartoum and Cairo. A large group took to the streets of Alexandria, Egypt’s second-largest city, to plead with God to remove the coronavirus.

Skeptics linked the virus to conspiracy theories and accused China of spreading it to destroy Muslims. Others viewed it as divine punishment for infidels. A Syrian preacher told his congregation during a Friday sermon that the virus is a soldier of God on a mission to annihilate China’s communist Buddhists because they persecute Uighur Muslims. (Muslims, he said, contract the virus for other reasons, mostly because God is testing the strength of their faith.)

The inability to understand how the virus spreads and how to cope with it breeds imaginary explanations. Faith that God can immunize us against the virus without any precautionary measures on our part pervades the minds of traditional Muslims.

The practice of kissing the shrines of Muslim holy figures, be they Sunni or Shiite, and appealing to them for a cure to the virus continues unabated because of clerical support.

There are, of course, rational religious people who abide by the rules of the temporal law, and atheists who say they do not trust conventional medicine and believe instead in unproven alternative medicine.

Christianity reformed itself in the 16th century, and so did Judaism in the 19th century. Islam still awaits its own reforms to face the challenges of modernity.

Our Finest Hour

Over the coming weeks, much will be at stake collectively, and for some of us also individually. Today, uncertainty about what the post-pandemic world will look like is rife, but we do know it will be built upon the words and deeds we choose now.

Javier Solana

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MADRID – As many readers may know, I am currently hospitalized in Madrid after having tested positive for COVID-19. My recovery has been slow, but the prospects are encouraging. Although remaining isolated from my loved ones has been unpleasant, it is a relief that these hardships are befalling us in the twenty-first century, with so many tools at our disposal to remain socially connected. More traditional pastimes – listening to music, reading, and, indeed, writing – have been a gift as well.

For many hours, I have relied upon a distinguished companion to endure this confinement: none other than Winston Churchill. I have always been fascinated by the wartime British prime minister, and these days I have been able to discover new details about his life, thanks to an extraordinary biography by the historian Andrew Roberts.

Churchill’s admirable resilience throughout World War II is an endless source of inspiration, particularly in times like these. His character and track record – both undoubtedly complex – remind us that heroism is compatible with imperfection, that presence of mind is compatible with contradiction, and that courage is compatible with hesitation. Characters like Churchill deserve to be recognized, which is not to say they should be uncritically glorified.

In the private wars that many of us are already waging against COVID-19, and that many others will unfortunately have to fight as well, we will surely experience some of the “blood, toil, tears, and sweat” that Churchill spoke of in May 1940. But we should also try to emulate his buoyant spirit. The virus reportedly alters some patients’ senses of smell and taste, but there is no reason why it should numb our sense of humor.

From a collective standpoint, it also makes sense to take a page out of Churchill’s book. In recent days, many world leaders have claimed that we are at war against the virus – and, to some extent, they are right. As in any other war, resources need to mobilized, and a host of civic values – such as duty, comradeship, and public service – need to be promoted with renewed conviction. The outstanding health professionals who, in Spain and all over the world, are giving their absolute best to fight the virus and alleviate the suffering of the ill are an example to us all.

We are facing a crisis of historic proportions. But if what we are going through can indeed be called a war, it is certainly not a typical one. After all, today’s enemy is shared by all of humankind, and the mobilization of state resources must go hand in hand with the demobilization of most of the population.

It is important not to lose sight of these and other differences. Otherwise the war rhetoric could cloud our judgment, leaving us vulnerable to certain traps. To avoid these undesirable scenarios, allow me to ring a few alarm bells and raise a few caveats.

First, we must not mistake strong leadership – which will certainly be needed in these dire circumstances – for inflexible leadership. Our governments should be given enough wiggle room to tackle this emergency properly, but that should not be taken to mean carte blanche – not now and not ever.

Ensuring maximal preservation of civil liberties and continuing to hold our leaders accountable is not just an ethical imperative; it is also our best line of defense against threats like the one we face today. Doing so does not weaken our societies; on the contrary, it enriches the public debate, thus increasing our chances of identifying the most suitable responses.

Second, we must not mistake patriotic responsibility – which no doubt will be needed and welcome – for exclusive forms of nationalism. This is no time for scapegoating or succumbing to panic and liberating our worst instincts. The ongoing crisis will be resolved only through rationality, compassion, and mutual understanding, both within and beyond our borders. All avenues of international scientific and technological cooperation must be explored, and always in a spirit of solidarity, which today, more than ever, overlaps fully with our own interests. The key to overcoming the current crisis is to ensure that the global spread of best practices outpaces the global spread of the virus.

Last, we must ensure that the socioeconomic landscape that emerges from this metaphorical war is in no way akin to those left behind after a real one. Reconstruction efforts must, in other words, be conceived preventively rather than reactively, and the shock-absorbing machinery must start working at full speed immediately.

European Union institutions and EU member states alike need to commit to do whatever it takes in this respect, in order to rise to the challenge. Other multilateral organizations and fora will also be indispensable in designing an effective joint response. Looking further into the future, we will need to make sure not to forget the many virtues of globalization – which of course requires careful reevaluation, but not outright rejection.

Over the coming weeks, much will be at stake collectively, and for some of us also individually. Today, uncertainty about what the post-pandemic world will look like is rife. But we do know it will be built upon the words and deeds we choose now. We would do well, therefore, to look the evil before us in the eye, while never losing sight of our own future and that of coming generations.

Humankind has overcome harder tests than this one, and the actions needed now are in no way equivalent to those undertaken during World War II. But, even if the COVID-19 crisis is not remembered as our respective countries’ “finest hour,” to borrow Churchill’s words, let it at least be remembered as our own.

Javier Solana, a former EU High Representative for Foreign Affairs and Security Policy, Secretary-General of NATO, and Foreign Minister of Spain, is currently President of the Esade Center for Global Economy and Geopolitics and Distinguished Fellow at the Brookings Institution.