has been a major shock to the growth

prospects of the global economy and the euro area economy.

The storm is upon us.

The Covid-19 disease that has devastated China, Italy,

and Iran is about to hit many other countries

with full force.

But the economic damage is already here.

We are starting now to see the data of just how

bad the economic damage is.

And it doesn't come just from the disease,

but from the measures governments are forced

to take to stop its spread.

They have taken draconian measures in one country

after another in order to stop people

from being physically near each other

and from socially interacting.

But this means that swaths of the economy

are being shut down.

And we are looking now at a downturn at least as

big as in the global financial crisis,

and very probably quite a lot larger and deeper.

In response to this, policymakers have taken

unprecedented actions in order to try to minimise an economic

hit that we know will be big.

They have used both monetary policy and fiscal policy

in unprecedented ways.

Monetary policy is what central banks do.

Fiscal policy is what governments

do with their budgets.

Yes, it will be significant.

But that's why we're doing everything we're doing.

We're doing whatever it takes to get through it.

And things will be better in time.

I think we're going to do something that gets money

to them as quickly as possible.

That may not be an accurate way of doing it,

because obviously some people shouldn't

be getting cheques for $1,000.

And we'll have a pretty good idea

by the end of the day what we're going to do be doing.

The world's central banks have done three types of things

in order to reduce the economic consequences.

00:01:51,610 --> 00:01:54,150 The first is to reduce interest rates in order

to make things easier for borrowers

to continue to borrow and to have a little bit

more extra cash.

Especially the Bank of England and the Federal Reserve,

the central banks of the US and the UK,

have put in place dramatic and very fast interest rate cuts.

00:02:13,670 --> 00:02:15,950 The second thing that central banks have done

is to intervene in markets, put a lot of money

into financial markets in order to make sure

that they function properly, and in order

to make it easier for banks to continue

to lend into the real economy.

They have also reduced, taken away some regulations,

and lightened some rules, again, to make

it easier for banks to lend.

00:02:38,080 --> 00:02:39,610 And the third thing they have done

is that they have gone on a buying spree.

Central banks have put a lot of money on the line

in order to buy assets such as government

bonds, corporate bonds, again in order

to make it easier for people to borrow and finance themselves

through this crisis.

And that means that central bank balance sheets that

were already big after the last crisis

are now set to become even quite a lot bigger.

What about the fiscal policymakers, governments?

They are also using their budgets vigorously

and in unprecedented quantities in order to cushion the shock.

00:03:31,180 --> 00:03:32,860 Most governments certainly in Europe

are committing to subsidising the wages of people

who are being laid off.

The intention is to prevent what is hopefully

a short shock from the disease from destroying

jobs and destroying companies to such an extent

that when governments can lift the restrictions on movement

and interaction, there are no jobs or shops or companies

to go back to.

This will cost a lot of money.

So governments are looking at increasing their debt

significantly.

And in some cases countries that already

have very large public debt burdens after the last crisis,

people are somewhat worried that they will

find it difficult to borrow.

But that's when we go back to the central bank action again.

When central banks buy government bonds in what is

called QE - quantitative easing - or asset purchase programmes,

they ensure that the borrowing costs for governments are low.

So the intention, at least, is to allow governments

to borrow as much as they need to do whatever it takes

to protect the economy as much as we can

from the deepest shock in generations.