How would economic policy respond to a recession in the United States and the euro zone?

We are not expecting a recession in the United States or in the euro zone, in the absence of mechanisms that could trigger one. W e nevertheless examine what kind of economic policies could be implemented in the United States and the euro zone if there were a recession: The central bank’s rate cuts would be very limited in the United States and non-existent in the euro zone; the ensuing fall in long-term interest rates would be very small in both countries; The governments would therefore have to use fiscal policy to boost activity, despite the high level of public debt ratios; And to prevent the expansionary fiscal policy from driving up long-term interest rates, given the high debt ratios, the central banks would have to resume quantitative easing and monetise public debt. The trap is clear: the impossibility of significantly lowering interest rates in the event of a recession would impose another upward surge in public debt ratios and liquidity (the monetary base).