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‘Are we still able to solve long-term problems? As Governor of the National Bank, it is my job to raise my concerns about this, ”says Pierre Wunsch.
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As in so many organizations, the corridors and offices of the National Bank are virtually empty these days. Almost everyone telecommutes, including the governor. Once a week, Wunsch walks from his home in the Marolles to his office, this time for an interview with De Tijd and L’Echo about this crazy corona crisis.
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When the pandemic broke out, Wunsch sent the message that Belgium full throttle had to give in order to cushion the shock of the stagnating economy without putting the brakes on because the budget would go off the rails. In June tempered he by saying that there is no money for a major recovery. Now he is looking ahead for the first time to the third phase: the moment of the invoice. By 2023, government spending must decline structurally, he says, or accidents are imminent.
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In the meantime, fires have to be extinguished here and there, but it will be precision work. That’s because this crisis is very special, he explains. ‘She’s very asymmetrical to begin with. Some sectors, such as food stores, banks and e-commerce, feel almost nothing. Others, such as tourism, transport and the events sector, are experiencing drama. Another oddity is that families normally withdraw money from their savings account to get through a crisis. Now savings are increasing, because the government supported incomes. ‘
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Is that savings the key to the recovery?
Wish: ‘At some point, families will start to spend their savings again. The question is when and at what pace. That’s why it was important to know why they aren’t spending their money. There were three hypotheses. They can’t go to the store like they used to. They don’t dare to go to the store for fear of the virus. Or they don’t dare, for fear of the future. Our surveys show that it was mainly the first two. ‘
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Is fear for the future less of an issue?
Wish: ‘Right now. But that could change if this crisis continues. ‘
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How permanent is the damage?
Wish: ‘The hospitality industry is suffering, but I feel it will recover relatively quickly once we get out of the crisis. The hotels are empty, but the buildings are there. There will be bankruptcies, but someone will take over the activity, just like after the bankruptcy of Swissport in Zaventem. ‘
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The day that there is a vaccine will be celebrated for a year, so to speak.
Pierre wish
Governor Nationale Bank
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‘For stores that don’t sell food, the change is permanent. People who did not buy online in the past and who took the first step during the pandemic will continue to do so. ‘
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And the events sector?
wish: ‘In the events sector, the recovery will be slower and many companies will disappear. For some it is game over. That being said, the day there is a vaccine will be a year of celebration, so to speak. Do not rule out the positive scenario too quickly. That is why I think it is good that the temporary support measures, such as temporary unemployment, will continue for a while. ‘
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The shock is asymmetrical and we don’t know how long it lasts. What kind of recovery can you expect from the government in such circumstances?
Wish: How do you define recovery? Spend tens of billions of euros on a massive scale without paying any attention to the budget? We cannot. We don’t have the money for it. ‘
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Does a recovery make sense in an open economy in which money leaks away to neighboring countries?
Wish: ‘I wouldn’t use that as an argument for inaction. If a recovery makes sense, we must organize it together with the neighboring countries. My argument is another: a general recovery is not necessary in the case of an asymmetrical shock and we don’t have the money for it. ‘
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Not even in these times of low interest rates?
Wish: ‘The budget deficit will be 12 percent of gross domestic product this year. We expect it to drop to around 6 percent by 2023. If the government implements a recovery plan, the deficit will remain a lot higher. For example 8 percent. And then something happens. A new crisis. Then we find ourselves in the situation in which Spain and Greece were in the euro crisis: that the government must make significant savings at a time when it is not desired. ‘
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Will the next federal government have to cut corners?
Wish: ‘I think we have to support a few more sectors this year and next. But very focused and temporary. I also have no problem increasing public investment this year and next. But by 2023, the government will have to make structural savings. There has to be a vision about that. ‘
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In Belgium, political instability has become structural. We have a full government for only two years out of three.
Pierre wish
Governor Nationale Bank
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Is a long-term strategy urgently needed?
Wish: The interest on sovereign debt is closely linked to the credibility of politics. In Belgium, political instability has become structural. We have a full government for only two years out of three. The markets and rating agencies are looking at that. ‘
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‘If we don’t know where we want to go, it will be dangerous. It’s a matter of credibility. We need a story about where we want to be at the end of this legislature. If our message becomes’ we’ll do a recovery and then we’ll see ‘it will end badly one day.’
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You don’t seem to believe that vision is there.
Wunsch: ‘I don’t have the impression that there is a political consensus on this. However, it is important to give people the message that money is not free. Now the idea that we can solve everything by printing some money sometimes thrives too easily. This is also the case in the discussion about the climate. ‘
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‘This holiday I read the book’ Le climat après la fin du mois’ by Christian Gollier. I can recommend it. He explains how people have been sold a utopia of a green recovery that costs nothing, creates jobs and generates money. That image is false. We’ll have to make an effort. ‘
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However, some say that a green transformation produces growth.
Wunsch: ‘It’s very simple: we will no longer be allowed to do some things. If we really want to make the economy climate neutral, we have to take a gigantic oil shock. We need a more serious debate about the climate. ‘
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What do you mean?
Wunsch: ‘Now the debate is caught in two camps: those who say that something is necessary, but that others will pay for it. And those who say there is nothing we can do because the invoice will end up with you. Let us stop that false contradiction. It takes a middle ground: recognizing that an effort is needed. Calculate how much it costs so that we no longer look at a black box. And look for consensus about how quickly and in what way you want to pay that invoice. ‘
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‘European ecology policy is also sick in that bed. First, a super ambitious goal is set. In the models that simulate how we get there, numerous technological innovations are included, so that it should not be said that the population has to pay to achieve that goal. ‘
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It is reminiscent of that other long-term bill: the aging population.
Wunsch: ‘It raises the question of whether we are able to solve long-term problems. In Scandinavia, for example, it is possible to describe the challenge, make the analysis and reach a consensus on a solution. We immediately start a polarized debate, after which we pretend we’re going to do something, do it halfway, and maybe not even that. In that sense, the national debt and the climate are the same problem: it is a debt for future generations. ‘
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‘I know it’s not easy. Some may find that I am easy to talk to. But if we don’t know where we want to land, it is my job as governor of the National Bank and as chairman of the High Council of Finance to voice my concerns about that. ‘
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