Although the communication could be better, the exit strategy for Belgium seems good and consistent.
First, there is no denying that the unveiling of the exit plans was very confusing and unclear. There was too much information and too many speakers. And the PowerpPoint slides looked like they were made by a 9-year old who made them out of boredom as he couldn’t go to school….
Consequently, the message got a bit lost. And the message itself seems very consistent. Starting from the 4th of May, some businesses may open again, but shops may only re-open on the 11th of May. This seems a little bit too early to me, just like the re-opening of the schools on the 18th of May. But the government has declared that nothing was written in stone and everything can be re-evaluated when the situation changes. I think a flexible strategy is indeed the way to go, although with the lack of good communication a lot of people ignored the “not written in stone”-part.
Furthermore, I think the focus now on mouth masks is a good measure to limit the risks of contagion during the less strict lockdown that is coming. There has been a lot of consternation surrounding if those mouth masks were needed or not. It might be a little uncomfortable and it is not a miracle solution, but it helps a little.
In conclusion, we need to stay very careful, but I think we are on the right track with our exit strategy.
I support the decision of the constitutional court to strike down the law that allowed people to do untaxed side jobs. I really think the government should not try to fix a broken system with some cut and paste work, instead they should look for structural solutions.
First of all, one of the main reasons why this law got created was to legalize some of the workers who were working “in the black”. As known, those workers did not pay any income taxes or social contributions to the amounts earned unofficially. So that is of course a problem. Also, they did not have the opportunity to insure themselves during that work. So now with the official tax-free work they could get insurance, so that problem is solved. But the fact that they do not contribute to our society gets tolerated by the government? I really do not see the point of that. If they do not want to pay taxes, they should be willing to accept the risk of not being insured… Legalizing untaxed labor contradicts with our whole governmental system. And yes, it’s quite possible that the cost of sending government agents to control if everything earned is declared is about as high as the tax earnings, but if we lose our principles where is the end… And if you consider the extra government jobs you create, that is an extra injection into our economy, extra tax income, and less unemployment costs…
Another reason why they introduced this is because the administration for a second occupation can be very bureaucratic in Belgium. I do agree with that conclusion, and that new measures to promote entrepreneurship are needed. But there are other options. For example, instead of letting people earn €6000 € untaxed, you could exempt them from doing bookkeeping. Just let them declare the amount earned on their tax form (as they must do now with the untaxed amount too). And tax them on that amount together with their other income. If you want to promote this, you can of course also exempt them from paying social contributions on this as they are already fully covered with their main occupation. Just income tax is already way better than the current system. Or tax them at a flat rate on this amount. Both systems will already be an improvement.
And one last reason against this law is the fact that all the conditions are very discriminatory. You must work 80%, unless it’s in the platform economy. If you earn more than €6000 (at first, for 2020 €6340) you must declare all your income as an independent. So, for example you earn €6339 via Deliveroo you get untaxed. But Deliveroo gives you a bonus of €10, then you can lose over €3000 on taxes. (I know people in that situation…). A better option would be that everybody with a second occupation gets their first 6340 untaxed and is only taxed on money made after this amount has been exceeded. Also, it is not fair that you can work as an employee for a plumber for example, and you can compete with your boss in your free time at much lower rates (untaxed).
So, I really think there should be a structural change instead of fighting the symptoms of our broken fiscal system.
I find it important to soften the economic downfall, but every measure taken will always be arbitrary.
First of all, I think nobody will deny the fact that measures are needed in these strange times. But the term “Financial Bazooka” as Pierre Wunsch himself uses in this article is a good example of one of the big problems with the measures taken. Like a real bazooka, they just shoot with powerful ammunition in one direction. For example, they’re giving a nuisance grant of €4000 to all establishments forced to close, but not to night shops that can keep open with limited opening hours, who obviously see their revenues lowering. Other examples are barber shops, physiotherapists, personal trainers.
Of course, every measure taken will always be de facto discriminatory. In the meantime, the government has taken other measures to help some of those who weren’t helped by the first measures. But now there’s a certainty that some will combine the different measures and even make a profit when comparing corona times and a regular period.
Lastly, the conditions to defer your mortgage doesn’t seem 100% fair to me. If you have €25.000 of savings, you can not defer your loan without costs. So, if you have been saving for example for your renovation and you’re planning to start in August, chances exist that you will have to delay. Whilst others who weren’t frugal and just blew up their money get helped by the financial institutions.
All these reasons here above strengthen me in my opinion that the government should try to take measures for all those affected by the crisis.
Having read the opinion of Mr. Draghi on the 25th of march in The Financial Times concerning how to battle the current economical crisis, I think there are issues with his traditional Keynesian way to deal with this situation.
To start with, Mr. Draghi suggests that the governments should invest money in the economy. I must admit this seems worthwhile, but the big problem to me is that this is an addictive solution. When would the pumping of money into the economy stop? As we have seen in the past, once they introduce a trick like this, they always go back to this solution whenever there is a minor problem…
Secondly, as I already mentioned, there is already a lot of public debt. When are we planning to erase this? We would have had much more power to fight this crisis if we weren’t this much in the red to begin with…In my opinion, The European Union should have been stricter concerning the national budgets in prosperous times. Of course, it’s too late for that now.
Lastly, I really think we are at breaking point now. The Western world could handle this again the same way Mr. Draghi has suggested, and I’m sure it would work again. But if we want to keep our current lifestyle, we should erase our debts in the upcoming years after the crisis or I fear there will be big economic disruption.
So, in conclusion, I think it may be time to consider another economical system, or at least some adaptations.
I came across this interesting video that describes how different businesses are reacting to the government measures. For example, some restaurants are shifting to delivery services, others are totally shutdown. How do these companies see their future? What about the employees? What do economists think about this? A lot of this (among other things) get explained in this video!
I think it's not democratic that presidential candidates get funded by billionaires and the big industries! Time for a new way of political campaigns! For more about my opinion, read my blog: https://t.co/pypnG2Vreu#ahsbem2atpic.twitter.com/pbidgxIfuo
And some of my reactions to other interesting tweets:
I see you take the same measures as my employer @NMBS here in Belgium. Good to see we're all on the same page here! Let's all hope the #CoronaCrisis will be gone soon #ahsbem2at
Personally, I think it's better to keep the stress tests but that the UK government would keep some deposits aside instead, so they could guarantee the loans of their citizens… My fear is that the banks would abuse this crisis to go "wild" again… #ahsbem2at
I think the corona crisis should be handled on a federal and supranational level.
First of all, there is no denying the big need for action to fight the effects of Covid 19. Separate states within the US and individual countries within Europe are all taking stringent measures. Some have already had a noticeable effect, whilst others seem to have less effect on first sight.
Furthermore, there seems to be no harmonization. For example, the state of New York and California are taking severe measures, but what’s the use if the other states are keeping things loose? Those 2 mentioned states aren’t isolated islands. Infected patients can still cross state borders and spread the virus. You could see the same problem last week in Europe with Belgian tourists visiting the Dutch border municipalities whilst the Belgian bars and shops were closed.
Another noticeable problem is the lack of clear instructions from a higher authority. This is not a state or a country’s problem, it is an international problem. Federal and international collaboration are needed here and now! Of course, in contrast to China or Russia for example, Europe and the US are decentralized governments. But in these exceptional times I really think the EU or even NATO should have executive power and be able to take control in this “state of emergency”. Of course, only for a short time and only concerning Corona related issues.
In conclusion, to me it’s clear there should be a better interaction between all governments on different levels.
I got inspired by the following article for this blog post:
In my opinion, governments have a tremendous responsibility to minimalize the effects of the Covid 19 virus and I think the way Canada fights this battle is a good example of how to do this.
First things first, I think there is no debate anymore that the economy or the health organizations will face difficult times in the near future. And almost everyone, except for some anarchists, is convinced that there lays a big task now for the government fighting the consequences of this big unknown.
Another remarkable fact is that there is a big difference in how different policy makers address this issue. Canada is dealing with this problem in a coherent way, they’re not only focusing on the economical issues, but also on the health issues. For example, they’re lowering the interest rates to promote economical activity, but they’re also pumping money in the health system. That’s a big difference with other North American countries. Of course, as they’re not the first country to deal with this problem and are somewhat isolated from Europe and China they had more time to prepare.
Lastly, and probably the most important, Mr. Trudeau is giving the good example himself as he has put himself in quarantine. The reason for this is his wife who has been diagnosed with the Covid 19 virus, consequently there is a risk he could contaminate other people, although he didn’t test positive himself. This is a striking contrast with Mr. Trump who keeps shaking hands even after he had contact with infected people, like Mr. Bolsonaro’s assistant.
In conclusion, I think the Canadian way of dealing with the Corona crisis is almost the paragon of how to deal with this issue.
One of my main inspirations for this blog post is the following article:
I think billionaires should not interfere with democratic processes.
As you can see now in America in the Democratic primaries, most candidates receive funds from billionaires. Of course, everyone is free to support their candidate, but questions arise.
Let us start by the question if a potential president can still be neutral if his campaign is paid by CEO’s and other big shots? What if Elon Musk for example is your donor and you must decide if electric car owners get tax benefits?
Secondly, doesn’t this system lead to a meritocracy instead of a democracy? Consequently, and here there is no real risk of getting things wrong, there’s a big chance in this system that the next president will try keep his donors satisfied. So, who will have the real power?
And most importantly, these donations are only the individual donations. There are big lobbying groups (Super PACS) who will start to promote the candidate that support their views. Those are mostly sponsored by big and wealthy companies. Their main goal is to keep their profits high. Although that’s an honorable goal it may interfere with the needs of a society.
To wrap it up, I really think the funding of presidential candidates needs to be reviewed, so money (of the aspirant president himself or from donations) isn’t the most important tool anymore in a modern democracy. America should evolve to a more European system of political funding.
There has been a lot of discussion lately about if the central bankers or other government agencies should change their monetary strategy during the Corona Crisis. Investors seem to panic and there has been a substantial slump in the stock prices. To me, these questions seem premature. Firstly, we have no idea as to what extent the Corona virus will spread. Furthermore, fed tools like a rate cut have very little noticeable effect in the first few months, it takes a year to feel them. There’s a big chance (but no certainty of course) the Corona virus will be gone within that time. But of course, President Trump puts the Fed under pressure as this is an election year, and for this reason he prefers a booming economy for the next 10 months instead of a flourishing economy later.
In my opinion, the government should help the economical players that are affected in the long term such as the travel companies and others. But I think a better option would be tailor-made solutions for the affected companies/industries instead of a general measure.
Robin Deroeck Finance & The Political world 