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Opinion
Elena Carletti, Marco Pagano, Loriana Pelizzon, and Marti G. Subrahmanyam

Germany Will Be a Post-Coronavirus Winner

Fiscally sound governments will be able to pump money into their companies unhindered by state aid rules. The EU needs an equity fund to level things up.

We’ll be back.

We’ll be back.

Photographer: Bloomberg/Bloomberg

All great economic crises pose two equally important challenges: they drain the liquidity necessary for the functioning of businesses, large and small, and burn up their equity capital, or a substantial part of it. Of the two, the former is the immediate challenge amid the coronavirus-induced lockdowns. Providing liquidity to companies is the top priority to ensure their survival. Yet this doesn’t guarantee their healing, or their ultimate durability and growth. Equity capital, the stuff that’s needed to invest and thrive, is essential to the second stage of recovery.

Today, many businesses have seen their revenues almost vanish and, therefore, find themselves in a severe cash crunch. Various proposals have been put forward to funnel money to businesses before they’re forced to lay off employees, cancel their supplies, and close their doors. One of these proposals is to have the European Investment Bank — the European Union’s lending arm — provide a liquidity lifeline to the continent’s firms, in the form of immediate, massive funding at zero interest to enable companies to meet their expiring debt obligations, with backup funding provided by the European Central Bank.