Stimulus packages have a habit of wrecking a domestic economy in very quick succession. Following the example set by the United States, Europe is now issuing stimulus packages for countries affected by the coronavirus as well.
Stimulus Packages Come to Europe
The coronavirus crisis can not be underestimated by any means. As more time progresses, COVID-19 claims more victims, both in terms of deaths and the number of hospitalized individuals. As some countries will not be able to handle this strain of their economy, solutions will need to be found sooner or later. That is often much easier said than done.
The European Parliament is willing to lend a helping hand in this regard. Earlier this week, two packages of financial support were approved. These stimulus packages will be given to countries affected by the coronavirus outbreak.
One package is valued at will see the EU Solidarity Fund being increased by an extra 800 million euro. While these measures make sense, they will eventually pose other problems down the line. For now, the main focus is to let EU countries draw from the Solidarity Fund if a public health emergency emerges.
Mobilizing funds within the existing EU budget to promote investments in various sectors is an interesting decision. Primarily the healthcare industry will need an influx of money. Not just to buy additional equipment, but also to upgrade infrastructure for the future. This may not be the last time a major health emergency becomes apparent.
In total, 37 billion euro will be freed up for the EU member states. They can all receive cash for the pre-financing of cohesion policy projects. The money will need to be returned to the EU budget eventually, however. What type of timeline countries will need to adhere to, has not been disclosed at this time.
Potentially Weakening the Euro
Injecting extra liquidity into the EU economy makes perfect sense under the current circumstances. A lot of money is needed to ensure that the coronavirus crisis is under control across the different member states.
However, every single time this measure is taken, it will come at a cost. That cost materializes in the form of weakening the Euro. In recent weeks, the value of the Euro has surged against other foreign currencies, including the US Dollar and Pound Sterling.
With these new measures, it is likely that the Euro will lose some of that momentum in the near future. Now is a good time for Europeans to invest in assets outside of foreign exchange. Both gold and silver make for very appealing options at any given time. Especially with the coronavirus still going on, precious metals are likely to increase in value for some time to come.