Report on Public Finances in EMU – 2020 published by European Economy Institutional (2/2021).
“The COVID-19 pandemic has caused an unprecedented health crisis with severe economic consequences. According to the latest Commission forecast presented in Part I of this report, euro area GDP is projected to have declined by almost 7% in 2020. Economic output in the euro area is expected to reach the pre-crisis level only by 2022. These projections are subject to significant uncertainty and elevated risks.
The current situation is characterised by deep uncertainty. In my view, fiscal policy in the euro area faces three key challenges. This report provides novel insights on each of them.
The first challenge is how to support the economic recovery. Part I of this report shows that the economic policy response to the COVID-19 pandemic has been swift, comprehensive and sizeable. At national level, both automatic stabilisers and substantial discretionary fiscal policy measures have mitigated the impact of the crisis. A coordinated response at EU level has complemented the actions taken by the Member States. In particular, the Commission has set in motion a major recovery plan, the Next Generation EU package, which has been endorsed by the European Council and adopted by the Council and the European Parliament. As part of it, the Recovery and Resilience Facility will offer unprecedented financial support in the form of grants and loans to strengthen the recovery in line with its major policies, particularly the European Green Deal, the digital strategy and building economic and social resilience. To finance the Next Generation EU package, the Commission will for the first time raise debt on behalf of the European Union on the capital markets that will need to be repaid later. Ensuring that this facility is implemented effectively will be crucial to ensure a lasting and sustainable recovery…”
