Pierre-André Chiappori, Monegasque economist and Professor of Economics at Columbia University, recently shared his thoughts on the economic impact of the Covid-19 pandemic. The Professor, who is also the author of several book on economics, spoke to a local news source while in self-isolation in Paris.
Different from the 2008 financial crisis
Pierre-André Chiappori described the Covid-19 economic situation as completely new and different to the 2008 financial crisis, which was related to a problem with the banking system. In that case, the economy did not find itself in a situation where it did not work. Current unemployment rates in the United States far exceed those of the 2008 crisis and are reaching levels not seen since the Great Depression.
The economy will recover…
The economist went on to say that when the pandemic is brought under control, the economy will sooner or later recover. But what we do during this pandemic is extraordinarily important. One thing that must be avoided at all costs is business chains going bankrupt. There is a lot of capital needed to start a business. Bankruptcy is extremely hard, since it is expensive and time consuming to re-establish a business. That is why economists are in favour of aid measures taken by certain governments, like France and Monaco. However, Pierre-André Chiappori believes the United States is in an economically worrying situation. People who found themselves unemployed in the US have lost their health insurance, which is especially absurd during a pandemic.
Priority number 1 should be the pandemic
According to Pierre-André Chiappori, the uncertain future in regard to the pandemic will cause less consumerism in the medium term. The pandemic is not over, there is no vaccine, no treatment, and because of these uncertainties, households and companies will be very careful about their investments. Recovery will be quick or it may take several years, no one knows, but priority number 1 should be the pandemic. The economist believes that a state going into debt to fight the pandemic is the best it can do.
Monaco’s debt is good news because we are doing the right thing
The Principality, which usually has budgetary surpluses, will have a deficit of 500 million euros or more this year. But the economist isn’t worried. Monaco’s deficit has no consequence in this case, because there is a reserve fund from past budget surpluses which is used for situations like this one. The Principality’s budget being in deficit is good news, according to Pierre-André Chiappori, because it means that the authorities are doing the right thing.