In the second half of his Vox EU piece, Tabellini embraces the view that the current crisis is likely not to be a rupture in economic thinking and history. He discusses potential problems in readjusting monetary policy once demand for liquidity returns to normal levels. The problem will be how to handle fears of inflation, and the timing of intervention will be crucial. The more concerning thing seems to be fiscal policy, performed by actors not insulated from political pressures. The reduction of the deficit will be hard given the expanded role of the state.
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Whereas monetary policy is managed by an independent bureaucracy according to technical criteria, fiscal policy stems from political processes whose outcomes are less predictable. It cannot be excluded that the expansion of the role of the state, started in order to temporarily counteract the crisis, will last longer and bring significant changes in the division of tasks between state and market, even in those countries in which the public sector has traditionally had more limited a role than in continental Europe.
