A pandemic directly disrupts the overall economic cycle of goods and services and reduces the associated payment flows between economic sectors. This not only causes a decline in demand and value added, but also pushes companies into a liquidity squeeze.
While automatic stabilisers can quickly counteract this, conventional instruments of stabilisation policy have little chance of success in the current situation. Unconventional fiscal policy instruments and interventions in private-sector contracts are much better at preventing a wave of insolvencies and thus preserving the production capacity for a dynamic upswing following the relaxation of health policy measures.