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The Risks of Exiting Too Early the Policy Responses to the COVID-19 Recession

This policy brief warns about the risks of discontinuing the policy responses to the COVID-19 crisis by pursuing exit strategies too early and/or too sharply. It outlines a comprehensive strategy for limiting such risks globally and offers an in-depth discussion of the European situation. Due to fiscal rules written in a pre-COVID-19 era and excessive emphasis on controlling public debt ratios, the Euro Area could be left with long-lasting scars, so its situation requires special treatment. Therefore, we articulate some policy proposals designed to preserve and strengthen the recovery in the EMU.