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Philip Muggenthaler

5 August 2021
ECONOMIC BULLETIN - BOX
Economic Bulletin Issue 5, 2021
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Abstract
This box reports evidence on the heterogeneous impact of the pandemic on euro area countries. It shows that the different impact on activity was largely due to different containment measures, heterogenous sectoral compositions and institutions. Economies with a larger share of high-contact services sectors were hit the hardest, even when lockdown measures eased over time. All euro area governments implemented fiscal support measures, albeit different in size, to alleviate the health and economic consequences of the pandemic. This led to divergence in public finances in 2020 compared with the pre-crisis period. Looking ahead, the Next Generation EU programme is expected to help reduce the economic divergence observed in the euro area in 2020 and foster a more inclusive recovery.
JEL Code
E6 : Macroeconomics and Monetary Economics→Macroeconomic Policy, Macroeconomic Aspects of Public Finance, and General Outlook
E21 : Macroeconomics and Monetary Economics→Consumption, Saving, Production, Investment, Labor Markets, and Informal Economy→Consumption, Saving, Wealth
E32 : Macroeconomics and Monetary Economics→Prices, Business Fluctuations, and Cycles→Business Fluctuations, Cycles
23 September 2020
ECONOMIC BULLETIN - ARTICLE
Economic Bulletin Issue 6, 2020
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Abstract
Fiscal policy is playing a key role in stemming the economic fallout from the coronavirus (COVID-19) pandemic. In addition to the discretionary fiscal policy measures employed by governments, automatic fiscal stabilisers play an important role in cushioning the economic downturn. This article shows that automatic fiscal stabilisers are generally sizeable in the euro area, but vary significantly across Member States. However, their effectiveness may be more limited at the current juncture, given the nature of the COVID-19 crisis and the high uncertainty surrounding its effects. This provides a rationale for a stronger role of discretionary fiscal policy at national and European level. Over the medium term, fiscal policies could increasingly make use of quasi-automatic fiscal instruments that provide additional timely, targeted and temporary macroeconomic stabilisation for the euro area. Careful consideration should be given to the design of such instruments over the business cycle, their economic efficiency, and to the need for building fiscal buffers in good times.
JEL Code
H12 : Public Economics→Structure and Scope of Government→Crisis Management
H20 : Public Economics→Taxation, Subsidies, and Revenue→General
E63 : Macroeconomics and Monetary Economics→Macroeconomic Policy, Macroeconomic Aspects of Public Finance, and General Outlook→Comparative or Joint Analysis of Fiscal and Monetary Policy, Stabilization, Treasury Policy