What strategy for the ECB?

We believe a “reasonable” strategy for the ECB would be to: Fully monetise the cyclical deficits related to underemployment, which will still be huge in 2021 and possibly 2022; Exit its monetisation policy once the degree of underemployment becomes low (second quarter of 2022, 2023? This will depend on the public health situation and growth in 2021) to avoid an even larger monetary expansion. If the ECB pursues this “reasonable strategy”, euro-zone governments: Will have free rein to run cyclical, crisis-related fiscal deficits that will disappear after the crisis. The counterpart of these deficits will be money, not debt; But will have to think about the fiscal deficits that will remain after the crisis that are related to permanent economic policies (industrial policy, tax cuts, poverty reduction, etc.). These deficits will have to be financed by issuing real government bonds, which will have to be held by investors. They will therefore have to correspond to efficient public policies that are beneficial to long-term growth.