What will be the economic impact of the pandemic? Are we going to see a repeat of the euro-crisis or is it going to be different this time?

On the downside, the economic consequences of the pandemic will be far worse than the euro crisis, while on the upside, the response will be very different.

The pandemic induced deficits are not due to structural problems; therefore, they don't necessarily require structural reforms. Euro countries immediately decided to suspend rules on fiscal deficits. Germany has given up its zero deficit policy and approved one package after the other to support the economy and employment. The member states and the EU have decided aid packages probably running into the trillions. Once we exit the lockdowns, trillions more are likely to be spent to stimulate the economic revival.

Governments around the world are likely to spend tens of trillions to undo the negative effects of the pandemic. In other words, this won't be another round of austerity. Quite the contrary, we'll be awash in money with trillions pumped into the economy.

Obviously, this will increase sovereign debts, but does it matter if debts increase in most countries?