The governor of the National Bank (BNB) has called on the government to do all it can to limit the economic damage of the coronavirus pandemic, as well as the measures the government took this week.
“Forget everything I said about the deficit and the need to reduce it,” bank governor Pierre Wunsch said. “The government must now do all it can to limit the damage to the economy, instead of chattering about how many millions it will cost and what the effect on the deficit might be.”
The BNB has spent the past several weeks advising the government to bring its budget into line and to build down government debt and the budget deficit. But that advice now takes second place behind the economic effects of the strict measures taken by the government, including the closure of shops, bars and restaurants and the call for as many people to work from home as possible.
“We now have to take timely and strong measures,” he said on VRT Radio 1. “We certainly have to intervene. Now is not the time to be talking about lowering the deficit. The priority now needs to be to tackle the crisis.”
Yesterday, in anticipation of the announcement of the government measures, the Brussels stock exchange plummeted by 14.2% on the Bel20 index, the biggest one-day fall in the institution’s history. In New York the Dow Jones had its largest drop since the financial crisis in 1987.
Wunsch called on the government to make use of existing mechanisms to protect the economy.
“we already have the means to make repayment terms more flexible, and a system of economic unemployment that works well,” he said. “But it could be that more is needed. Elsewhere in Europe they are looking at guarantees for sectors that are hit hard. I certainly wouldn’t rule that out.”
Wunsch was speaking before the announcement by the Flemish government which pledged a guarantee fund for businesses who have to renegotiate credit repayments with the banks. The fund of €100 million would guarantee rescheduled credit to the tune of 75%.