The fiscal response to the economic fallout from the coronavirus by Julia Anderson, Enrico Bergamini, Sybrand Brekelmans, Aliénor Cameron, Zsolt Darvas, Marta Domínguez Jíménez, Catarina Midões published by bruegel (6/2020).
“The various lock-down measures in response to coronavirus have halted economic activity in certain sectors and harshly disrupted others. The resulting job losses and bankruptcies are likely to create major economic strains for millions in Europe and worldwide.
In the euro area, the European Central Bank has reacted with strong monetary policy and supervisory measures announced on 12 and 18 March 2020. Governments throughout the European Union have started to announce and implement various fiscal measures to contain the economic fallout. European state aid rules and fiscal rules have been suspended.
In this dataset we summarise and compare the discretionary fiscal responses of EU countries, the United Kingdom and the United States. We consider only adopted measures. Other measures under discussion will be added to our comparison when adopted.
We consider only discretionary fiscal measures, while budget balances will deteriorate because of the likely severe economic downturn, leading to lower tax revenues and higher unemployment benefit payments.
We group discretionary fiscal measures into three categories:
Immediate fiscal impulse: additional government spending (such as medical resources, keeping people employed, subsidising SMEs, public investment) and foregone revenues (such as the cancellation of certain taxes and social security contributions). These types of measures immediately lead to deterioration of the budget balance without any direct compensation later.
Deferrals: several governments have decided to defer certain payments, including taxes and social security contributions, which in principle should be paid back later. These measures improve the liquidity positions of individuals and companies but do not cancel their obligations. Therefore, these measures cause deterioration of the budget balance in 2020, but improve it later. A few countries have also deferred the servicing of loans or the payment of utility bills, which also improve the liquidity positions of those impacted. Even if the loans were granted by private banks and utilities are provided by private providers, the budget balance will deteriorate in 2020 because of lower profits and consequent taxes, but will improve later.
Other liquidity provisions and guarantees: these measures include export guarantees, liquidity assistance, credit lines through national development banks. Some of these measures improve the liquidity position of the private sector, but unlike deferrals which are automatic and generally apply to the target groups, credit lines require action from the impacted companies. Credit lines and guarantees might not weaken the budget balance in 2020, but would create contingent liabilities which might turn into actual expenses either in 2020 or later.
The table summarises the amount (as a share of GDP) of these measures by country, while the detailed country-specific measures are explained below…”
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