Claudia Buch: The corona pandemic – economic consequences and economic policy responses

Speech by Prof Claudia Buch, Vice-President of the Deutsche Bundesbank, at a Panel discussion Verein für Socialpolitik Annual Meeting 2021, Regensburg, 28 September 2021.

The views expressed in this speech are those of the speaker and not the view of the BIS.

The coronavirus pandemic is an unprecedented humanitarian crisis with severe economic and social costs. On this panel, I will focus on the implications of the pandemic on the financial system, making three main points.

First, extensive fiscal and monetary policy responses have cushioned the impact of the shock on households and businesses, and have – indirectly – protected the financial system. In this sense, the coronavirus pandemic has been a "crisis without a crisis" for the German banking system.

Second, vulnerabilities in the financial system continue to build up, and the effects of future macroeconomic downturns might be underestimated. In Germany, house prices and mortgage lending keep increasing. As we are leaving the phase of acute crisis management behind, this reinforces the need to take preventive action in order to mitigate future risks to financial stability.

Third, the coronavirus pandemic has accelerated the process of structural change arising from climate change and digitalisation. This puts demands on the financial system to both, respond to structural change in the financial sector and to support the real economy in its transition process. Good data, analysis and research have important roles to play in understanding the links between the financial system and the real economy.