An Unequal Recovery Would be Politically Explosive

Summary:

When lockdown restrictions are eased, office workers will spend while poorer people, who have been more likely to get COVID-19, may struggle. Centre-right parties are still the biggest political forces in most European countries: in order to stop the populists and safeguard democracy and market capitalism, they must discover their inner social democrats. They – and governments led by the centre-left – should provide a pro-poor fiscal stimulus once vaccines allow social distancing to be relaxed, followed by tax and benefits reforms that shield poor people’s consumption from any attempt to reduce fiscal deficits. A rapid return to fiscal rectitude following the pandemic would lead to further stagnation, sending more voters towards the extremes.

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