How Do We Finance the Corona Debt? Attempting a “Right” Answer to the “Wrong” Question from the Perspective of Modern Monetary Theory

Abstract

The year 2020 was marked by the COVID-19 pandemic and its economic consequences. In Germany, government deficits as well as the debt ratio rose to an estimated 5 % and 75 % of GDP respectively as a result of the decline in economic output. In order not to jeopardise the post-pandemic economic recovery by returning to a rigid austerity policy, it is now of particular importance to abandon misconceptions regarding the financing as well as the sustainability of government expenditure surpluses. This is the only way to set the right course for an economic policy of the 21st century.