(July 9): The speed and magnitude of the globally synchronised deterioration in public finances is among the many unprecedented developments over the past six months. It has been a more sudden and pronounced shock than the global financial crisis a decade ago, and will have a lasting fiscal impact even if the economic recovery eventually recoups most of the lost income.

Recessions take a toll on public finances, since one of the primary objectives of fiscal policy in all but the lowest-income countries is to smooth the tops and bottoms of economic cycles.

Crises are apt to take a much greater toll, however, as they can engender more fundamental questions about the size of government and role of the state. Understandably, governments worldwide responded quickly to the Covid-19 crisis, putting aside financial considerations. The question is what will happen afterward.

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