The stop-and-go health management of the COVID crisis in Europe increases uncertainty and weakens the economy

Unlike in Asia, Europe has clearly decided to manage the COVID crisis safely in stop-and-go mode: a tightening of health rules, leading to a reduction in the number of cases with a lag, then an easing of rules, and an increase in the number of cases with a lag, leading to a another tightening of rules, etc. A search for a stable equilibrium with permanent health restrictions at the intermediate level could have been considered. Health stop-and-go is bad for the economy: it adds variability and uncertainty, which depresses employment and investment compared with a stable situation. We can draw a parallel between the COVID health management and monetary policy: as the policy chosen acts with a lag (on the number of cases, on inflation), to obtain a stable situation and avoid stop-and-go, it is necessary to act in a forward-looking way and not by reacting to actual developments.