26 research outputs found
Coronavirus and financial stability 3.0: Try equity – risk sharing for companies, large and small
This policy letter adds to the current discussion on how to design a program of government assistance
for firms hurt by the Coronavirus crisis. While not pretending to provide a cure-all proposal, the
advocated scheme could help to bring funding to firms, even small firms, quickly, without increasing
their leverage and default risk. The plan combines outright cash transfers to firms with a temporary,
elevated corporate profit tax at the firm level as a form of conditional payback. The implied equity-like
payment structure has positive risk-sharing features for firms, without impinging on ownership
structures. The proposal has to be implemented at the pan-European level to strengthen Euro area
resilience