Once the health emergency of the COVID-19 pandemic is over, the European Central Bank (ECB) should pay money directly to citizens (without reimbursement) to respond to the looming economic recession, according to a new report by the NGO Positive Money Europe, published on Monday 30 March.
According to the document, such a practice, also known as ‘helicopter money’, would be the most effective and quickest way to revive economic activity by stimulating consumption once the COVID-19 public health crisis has been overcome.
This view was shared by MEP Aurore Lalucq (S&D, France) and economist Jézabel Couppey-Soubeyran, who, in an op-ed published the same day in L'Obs, said that helicopter money “will be able to regain prosperity much faster than relying on banks and markets”.
The Positive Money Europe report estimates that a transfer of 1, 000 euros to all euro area citizens would provide an immediate boost of at least 1.2% of GDP, without taking into account positive spillovers and fiscal multipliers.
Moreover, as helicopter money has the advantage of not increasing public debt, it “will ensure that EU policymakers are not drawn into another round of misguided austerity in the aftermath of the crisis”, the NGO points out.
Compatibility with EU treaties? Finally, the report states that no amendments to the EU Treaties are necessary for the unilateral and autonomous implementation of the helicopter money policy by the ECB.
“Article 123 of the TFEU only prohibits the direct financing of governments, but does not prohibit the European Central Bank from making direct transfers to households”, the report points out.
Nevertheless, Positive Money Europe considers that a politically coordinated approach with the European institutions and Member States “would greatly facilitate the deployment and effectiveness of the policy”.
Differences with the US stimulus package. As part of its $2 trillion stimulus package, Washington recently announced a measure that is similar to this policy, since every American household below a certain income ceiling will receive a Treasury check in early April in the amount of 1,200 dollars for an adult, 2,400 dollars for a couple and 500 dollars per child.
However, this money will come from the federal budget and not from the FED (the US Central Bank). “Unlike helicopter money, it is not a monetary policy instrument as we are proposing”, Stanislas Jourdan, Director of Positive Money Europe and author of the report, told EUROPE.
To consult the report and the op-ed (op-ed in French): https://bit.ly/3dENSzA and https://bit.ly/2UQnXMA (Original version in French by Damien Genicot)