PARIS: The mammoth bailout sums unleashed to combat the 2008 financial crisis fuelled populist backlashes in many countries as taxpayers were handed a whopping bill.

This time feels different. Governments and central banks are all too aware that they face an unprecedented test from an invisible enemy that could kill their economies.

The sums mobilised now — trillions in direct fiscal and monetary support, and loan guarantees — outstrip what was offered in 2008 to rescue banks from their own folly.

What’s on offer?

All major economies are battling to halt the carnage on financial markets, intervening directly to save businesses and jobs, and indirectly via their central banks.

“We are witnessing a panic movement in which markets, like businesses, are seeking liquidity at all costs, and selling anything that is sellable,” said Agnes Benassy-Quere, professor at the Paris School of Economics. There is “no other way than to issue a lot of debt and to make sure that it will be bought by central banks,” she said.

While the virus appears contained in China, European countries and the United States are going all out with spending promises to limit the fallout of their own runaway outbreaks.

The biggest stimulus package comes from Washington where Senate Republicans on Thursday introduced a $1tr plan in line with demands from President Donald Trump.

Democrats are unconvinced by some of Trump’s wish-list. But eschewing the traditional Republican aversion to debt and deficits, Senate Majority Leader Mitch McConnell underscored that “this is no ordinary time”.

Treasury Secretary Steven Mnuchin said the government had “no problem issuing more debt” at super-low rates after recent interventions by the Federal Reserve.

Published in Dawn, March 21st, 2020