Question A:
Government support to private firms in the form of debt (either directly or with the help of public guarantees) is desirable, but risks leaving them with too much leverage to invest and grow in the future.
Responses
Responses weighted by each expert's confidence
Question B:
Providing funds to viable businesses in the form of equity injections is a vital complement to debt support.
Responses
Responses weighted by each expert's confidence
Question C:
With the EU ban on state aid suspended, government capital injections should be provided via a newly created pan-European equity fund, rather than be left to national governments acting independently.
Responses
Responses weighted by each expert's confidence
Question A Participant Responses
| Participant | University | Vote | Confidence | Bio/Vote History |
|---|---|---|---|---|
 Franklin Allen |
Imperial College London | Bio/Vote History | ||
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Depends very much on the situation the firm is in.
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 Pol Antras |
Harvard | Bio/Vote History | ||
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Maybe, but it beats the alternative of -100% growth for some firms.
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 Olivier Blanchard |
Peterson Institute | Bio/Vote History | ||
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if firm in trouble because of crisis loan, then chapter 11, or government as creditor changes loan to grant.
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 Nicholas Bloom |
Stanford | Bio/Vote History | ||
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We need to support firms but cannot simply give them grants - this is similar to the unpopular bank bailouts from 2009.
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 Richard William Blundell |
University College London | Bio/Vote History | ||
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 Agnès Bénassy-Quéré |
Paris School of Economics | Bio/Vote History | ||
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 Elena Carletti |
Bocconi | Bio/Vote History | ||
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 Jean-Pierre Danthine |
Paris School of Economics | Bio/Vote History | ||
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Fully agree for a panel of small and medium firms with low profitability
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 Paul De Grauwe |
LSE | Bio/Vote History | ||
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 Jan Eeckhout |
UPF Barcelona | Bio/Vote History | ||
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 Ernst Fehr |
Universität Zurich | Bio/Vote History | ||
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 Xavier Freixas |
Barcelona GSE | Bio/Vote History | ||
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The problem of debt overhang appears after each crisis, and this one is not different. Increasing debt will make it worst.
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 Nicola Fuchs-Schündeln |
Goethe-Universität Frankfurt | Bio/Vote History | ||
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It depends a lot on the sector: for some, we might expect a strong increase after the suppressed demand, for others not (especially services
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 Jordi Galí |
Barcelona GSE | Bio/Vote History | ||
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The risk is proportional to the duration of the lockdown.
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 Francesco Giavazzi |
Bocconi | Bio/Vote History | ||
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 Rachel Griffith |
University of Manchester | Bio/Vote History | ||
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 Veronica Guerrieri |
Chicago Booth | Bio/Vote History | ||
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 Luigi Guiso |
Einaudi Institute for Economics and Finance | Bio/Vote History | ||
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 Patrick Honohan |
Trinity College Dublin | Bio/Vote History | ||
 Beata Javorcik |
University of Oxford | Bio/Vote History | ||
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 Jan Pieter Krahnen |
Goethe University Frankfurt | Bio/Vote History | ||
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Debt overhang is a major problem in this crisis - as an earnings shortfall needs to be bridged. Adding debt may prove self-defeating.
-see background information here |
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 Botond Kőszegi |
Central European University | Did Not Answer | Bio/Vote History | |
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 Eliana La Ferrara |
Harvard Kennedy | Did Not Answer | Bio/Vote History | |
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 Christian Leuz |
Chicago Booth | Bio/Vote History | ||
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Debt overhang is a serious concern.
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 Thierry Mayer |
Sciences-Po | Did Not Answer | Bio/Vote History | |
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 Costas Meghir |
Yale | Bio/Vote History | ||
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 Peter Neary |
Oxford | Bio/Vote History | ||
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 Kevin O'Rourke |
Oxford | Bio/Vote History | ||
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 Marco Pagano |
Università di Napoli Federico II | Bio/Vote History | ||
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High indebtededness will lead to debt overhang, and therefore low investment and growth, as in the wake of the 2008-09 and 2011-12 crises.
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 Lubos Pastor |
Chicago Booth | Bio/Vote History | ||
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But loans can be forgiven under certain conditions, such as if firms preserve employment.
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 Torsten Persson |
Stockholm University | Did Not Answer | Bio/Vote History | |
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 Christopher Pissarides |
London School of Economics and Political Science | Bio/Vote History | ||
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Surely it depends how much debt. Prudent choice of level can never be bad considering the alternative of bankruptcy
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 Richard Portes |
London Business School | Bio/Vote History | ||
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 Canice Prendergast |
Chicago Booth | Bio/Vote History | ||
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 Lucrezia Reichlin |
London Business School | Did Not Answer | Bio/Vote History | |
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 Rafael Repullo |
CEMFI | Bio/Vote History | ||
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 Hélène Rey |
London Business School | Bio/Vote History | ||
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Of course there will eb a lot of heterogeneity across firms
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 Antoinette Schoar |
MIT | Bio/Vote History | ||
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Terms of debt should be structured to reduce debt overhang. Burdening tax payers with subsidies to bad businesses is not a great alternative
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 Daniel Sturm |
London School of Economics | Bio/Vote History | ||
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 John Van Reenen |
LSE | Bio/Vote History | ||
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 John Vickers |
Oxford | Bio/Vote History | ||
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 Hans-Joachim Voth |
University of Zurich | Bio/Vote History | ||
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 Beatrice Weder di Mauro |
The Graduate Institute, Geneva | Bio/Vote History | ||
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 Karl Whelan |
University College Dublin | Bio/Vote History | ||
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Yep.
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 Charles Wyplosz |
The Graduate Institute Geneva | Bio/Vote History | ||
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Some of these debts will have to be forgiven and will end up as transfers from taxpayers
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 Fabrizio Zilibotti |
Yale University | Bio/Vote History | ||
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Question B Participant Responses
| Participant | University | Vote | Confidence | Bio/Vote History |
|---|---|---|---|---|
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Franklin Allen |
Imperial College London | Bio/Vote History | ||
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Again, depends very much on the position of the firm.
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Pol Antras |
Harvard | Bio/Vote History | ||
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That seems a slippery slope to me. I guess I would need to hear a convincing argument for why this can't be done otherwise.
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Olivier Blanchard |
Peterson Institute | Bio/Vote History | ||
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``vital'' is ambiguous. essential no. potentially useful for some: yes
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Nicholas Bloom |
Stanford | Bio/Vote History | ||
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This is suitable for few firms - most firms are private with closely held equity, making this policy complex.
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Richard William Blundell |
University College London | Bio/Vote History | ||
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Agnès Bénassy-Quéré |
Paris School of Economics | Bio/Vote History | ||
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Elena Carletti |
Bocconi | Bio/Vote History | ||
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Jean-Pierre Danthine |
Paris School of Economics | Bio/Vote History | ||
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I agree in substance but outright subsidies (vs. credits) might be even more important for non-quoted firms
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Paul De Grauwe |
LSE | Bio/Vote History | ||
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Jan Eeckhout |
UPF Barcelona | Bio/Vote History | ||
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Ernst Fehr |
Universität Zurich | Bio/Vote History | ||
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Xavier Freixas |
Barcelona GSE | Bio/Vote History | ||
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It may reduce the level of effort. So additional financial mechanisms (warrants to the owners?) are required
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Nicola Fuchs-Schündeln |
Goethe-Universität Frankfurt | Bio/Vote History | ||
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Jordi Galí |
Barcelona GSE | Bio/Vote History | ||
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Alternatively, partial write offs of loans
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Francesco Giavazzi |
Bocconi | Bio/Vote History | ||
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Rachel Griffith |
University of Manchester | Bio/Vote History | ||
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Veronica Guerrieri |
Chicago Booth | Bio/Vote History | ||
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Luigi Guiso |
Einaudi Institute for Economics and Finance | Bio/Vote History | ||
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Patrick Honohan |
Trinity College Dublin | Bio/Vote History | ||
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Need to ensure that this support does not either result in unneeded bankruptcies or enrich business owners.
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Beata Javorcik |
University of Oxford | Bio/Vote History | ||
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Jan Pieter Krahnen |
Goethe University Frankfurt | Bio/Vote History | ||
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The pandemic crisis has pushed companies across Europe deeply into debt overhang-waters - equity-type is therefore an adequate response.
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Botond Kőszegi |
Central European University | Did Not Answer | Bio/Vote History | |
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Eliana La Ferrara |
Harvard Kennedy | Did Not Answer | Bio/Vote History | |
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Christian Leuz |
Chicago Booth | Bio/Vote History | ||
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Makes sense to offer equity as well. But devil is in the detail here. In past, non-voting preferred stock prgs have been quite successful.
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Thierry Mayer |
Sciences-Po | Did Not Answer | Bio/Vote History | |
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Costas Meghir |
Yale | Bio/Vote History | ||
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Peter Neary |
Oxford | Bio/Vote History | ||
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Desirable in principle. But public-sector bandwidth is limited right now; tailoring equity injections to individual firms a massive task
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Kevin O'Rourke |
Oxford | Bio/Vote History | ||
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Marco Pagano |
Università di Napoli Federico II | Bio/Vote History | ||
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An equity injection in viable businesses will avoid the debt overhang problem.
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Lubos Pastor |
Chicago Booth | Bio/Vote History | ||
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Torsten Persson |
Stockholm University | Did Not Answer | Bio/Vote History | |
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Christopher Pissarides |
London School of Economics and Political Science | Bio/Vote History | ||
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It avoids debt buildup!
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Richard Portes |
London Business School | Bio/Vote History | ||
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Canice Prendergast |
Chicago Booth | Bio/Vote History | ||
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Lucrezia Reichlin |
London Business School | Did Not Answer | Bio/Vote History | |
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Rafael Repullo |
CEMFI | Bio/Vote History | ||
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Need not be in the form of equity injections.
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Hélène Rey |
London Business School | Bio/Vote History | ||
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Antoinette Schoar |
MIT | Bio/Vote History | ||
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in private firms equity not possible for lack of trnsparency. in public firms existing shareholders need to be diluted to preserve incentive
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Daniel Sturm |
London School of Economics | Bio/Vote History | ||
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It will be really difficult to role this out at scale (particularly to smaller firms)
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John Van Reenen |
LSE | Bio/Vote History | ||
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John Vickers |
Oxford | Bio/Vote History | ||
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Hans-Joachim Voth |
University of Zurich | Bio/Vote History | ||
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Taxpayers should own part of the upside if they foot the bill.
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Beatrice Weder di Mauro |
The Graduate Institute, Geneva | Bio/Vote History | ||
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Equity is only one form of dealing with the problem
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Karl Whelan |
University College Dublin | Bio/Vote History | ||
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Equity supports may work for some types of business (e.g. perhaps airlines may need to nationalised) but less workable for SMEs.
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Charles Wyplosz |
The Graduate Institute Geneva | Bio/Vote History | ||
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What about unlisted firms?
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Fabrizio Zilibotti |
Yale University | Bio/Vote History | ||
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Question C Participant Responses
| Participant | University | Vote | Confidence | Bio/Vote History |
|---|---|---|---|---|
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Franklin Allen |
Imperial College London | Bio/Vote History | ||
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Again it depends on the circumstances and how state aid rule relaxations will be unwound.
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Pol Antras |
Harvard | Bio/Vote History | ||
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Olivier Blanchard |
Peterson Institute | Bio/Vote History | ||
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again ``should'' is too strong. Risk sharing, in this form or any other, is highly desirable, but not absolutely required.
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Nicholas Bloom |
Stanford | Bio/Vote History | ||
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Richard William Blundell |
University College London | Bio/Vote History | ||
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Agnès Bénassy-Quéré |
Paris School of Economics | Bio/Vote History | ||
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There is a risk of inefficient nationalistic policies here.
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Elena Carletti |
Bocconi | Bio/Vote History | ||
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Jean-Pierre Danthine |
Paris School of Economics | Bio/Vote History | ||
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Paul De Grauwe |
LSE | Bio/Vote History | ||
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We cannot wait for such a European approach. National authorities have to act now
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Jan Eeckhout |
UPF Barcelona | Bio/Vote History | ||
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Ernst Fehr |
Universität Zurich | Bio/Vote History | ||
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Xavier Freixas |
Barcelona GSE | Bio/Vote History | ||
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Depends on how the risks are mutualized
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Nicola Fuchs-Schündeln |
Goethe-Universität Frankfurt | Bio/Vote History | ||
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We need both.
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Jordi Galí |
Barcelona GSE | Bio/Vote History | ||
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Francesco Giavazzi |
Bocconi | Bio/Vote History | ||
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Rachel Griffith |
University of Manchester | Bio/Vote History | ||
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Veronica Guerrieri |
Chicago Booth | Bio/Vote History | ||
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Luigi Guiso |
Einaudi Institute for Economics and Finance | Bio/Vote History | ||
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Patrick Honohan |
Trinity College Dublin | Bio/Vote History | ||
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This is directly needed to assist the functioning of the single market.
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Beata Javorcik |
University of Oxford | Bio/Vote History | ||
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Jan Pieter Krahnen |
Goethe University Frankfurt | Bio/Vote History | ||
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The pan-European nature levels the "playing" field, and creates --via the Fund-- a common interest in the prosperity of Europe as a whole.
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Botond Kőszegi |
Central European University | Did Not Answer | Bio/Vote History | |
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Eliana La Ferrara |
Harvard Kennedy | Did Not Answer | Bio/Vote History | |
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Christian Leuz |
Chicago Booth | Bio/Vote History | ||
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Agree that level playing field for businesses across EU is important. Fund could also kick start EU VC funding (not just old biz).
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Thierry Mayer |
Sciences-Po | Did Not Answer | Bio/Vote History | |
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Costas Meghir |
Yale | Bio/Vote History | ||
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Peter Neary |
Oxford | Bio/Vote History | ||
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More EU-wide cooperation is desirable. This proposal risks bureaucracy and underpinning increasing authoritarianism in Hungary and Poland
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Kevin O'Rourke |
Oxford | Bio/Vote History | ||
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Marco Pagano |
Università di Napoli Federico II | Bio/Vote History | ||
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Leaving firm recapitalization to national governments alone would lead viable firms in jurisdictions with lower fiscal capacity at a loss.
-see background information here |
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Lubos Pastor |
Chicago Booth | Bio/Vote History | ||
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Torsten Persson |
Stockholm University | Did Not Answer | Bio/Vote History | |
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Christopher Pissarides |
London School of Economics and Political Science | Bio/Vote History | ||
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About time EU nations did something for each other, (and as a byproduct, to show Britain what it is missing)
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Richard Portes |
London Business School | Bio/Vote History | ||
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Canice Prendergast |
Chicago Booth | Bio/Vote History | ||
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Lucrezia Reichlin |
London Business School | Did Not Answer | Bio/Vote History | |
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Rafael Repullo |
CEMFI | Bio/Vote History | ||
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Very complicated at the national level, even more so at the European level.
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Hélène Rey |
London Business School | Bio/Vote History | ||
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Ideally would be better but timing is important and this may take too long to agree.
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Antoinette Schoar |
MIT | Bio/Vote History | ||
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Tax compliance+efficiency in EU varies at natnl level. Citizens in efficient countries should not bailout firms in countries that dont pay.
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Daniel Sturm |
London School of Economics | Bio/Vote History | ||
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John Van Reenen |
LSE | Bio/Vote History | ||
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John Vickers |
Oxford | Bio/Vote History | ||
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There is no such fund, or institutional context for one, and principles of operation are unclear
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Hans-Joachim Voth |
University of Zurich | Bio/Vote History | ||
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If the crisis has shown anything, it is that the EU is not the answer
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Beatrice Weder di Mauro |
The Graduate Institute, Geneva | Bio/Vote History | ||
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Karl Whelan |
University College Dublin | Bio/Vote History | ||
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I suspect this is just adding an extra layer of bureaucracy to what is already going to be a difficult issue to resolve.
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Charles Wyplosz |
The Graduate Institute Geneva | Bio/Vote History | ||
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If only...
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Fabrizio Zilibotti |
Yale University | Bio/Vote History | ||
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