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This briefing provides a summary of the recent economic developments in the EU Member States and gives an overview of relevant economic projections forecasted by major international and EU institutions

This document presents: • The 2019 Country-Specific Recommendations (CSRs) adopted by the Council, in the framework of the European Semester, on 9 July 2019 (on the basis of European Commission proposals of 5 June 2019). • The European Commission’s assessments of the implementation of the 2019 CSRs based on its Country Reports published on 26 February 2020. • The 2020 CSRs adopted by the Council, in the framework of the European Semester, on 20 July 2020 (on the basis of European Commission proposals ...

This paper situates the EU’s fiscal response to the pandemic (suspending the Stability and Growth Pact, creating the SURE and Recovery and Resilience Facility) within longstanding debates on reforming EU fiscal governance and offers recommendations on the way forward, specifically the SGP reforms needed prior to returning to its rules and creating a budget with a stabilisation capacity.

Once More, the US Leads Europe

Selvitys 29-06-2021

The US and European economic approaches to the COVID-19 pandemic have differed in many ways. It is most likely that the US recovery will come sooner and will be stronger than in Europe, pretty much as has been the case with the global financial crisis a decade ago. In order to achieve a solid and lasting recovery, Europe needs to learn from the previous crisis and to prepare for the effects of the coming rapid US expansion. This paper was provided by the Policy Department for Economic, Scientific ...

The main legacy of the post-Covid-19-crisis euro area fiscal framework should be the development of a unique integrated fiscal policy and of a permanent and independent Fiscal Fund to implement it. To arrive at this conclusion, we analyse the challenges and build on current research on the optimal design of a fiscal fund. We characterise the fiscal policy, and the development of the Fund, together with the role and form that the Stability and Growth Pact can take in the new fiscal framework.

The euro area response to the Covid crisis avoided a financial crisis. In the short term, the withdrawal of fiscal stimulus should be guided by unemployment, output gap and inflation data. Over the medium term, reducing public debt ratios will require maintaining the growth of primary spending below the (higher) GDP growth rate to be achieved through structural reforms. Over the longer term, creating a central fiscal capacity, strengthening the enforcement of fiscal rules in good times and completing ...

We present a review of the channels through which the US fiscal and monetary post-pandemic policies may affect the euro area. US spillovers will likely be relevant and worth considering while setting the policy stance in the euro area, at a crossroad between economic global recovery and global overheating. A key role is going to be played by global financial markets, their appetite for open-ended stimulative policies and fears of hard disinflation scenarios affecting central banks' ability to keep ...

The recent US fiscal packages have raised some concerns on their magnitude, but also their spillovers to the euro area economy. After discussing US fiscal measures and reviewing the literature on international spillovers, we show that the US policy mix may have rather positive macroeconomic effects on the euro area. We conclude though that these effects need to be balanced against growing financial risks. This paper was provided by the Policy Department for Economic, Scientific and Quality of Life ...

The US has undertaken much larger discretionary fiscal packages than euro area governments, particularly in 2021. The large 2021 US fiscal package is likely to provide a welcome boost to the euro area economy. There is a risk, however, that US fiscal policy could lead to overheating of the US economy and a possible monetary tightening from the Fed which could trigger a recession. This paper argues this scenario is unlikely to occur but discusses the implications for the ECB if it did. This paper ...

The main thrust of fiscal and monetary responses to the pandemic in the EU and the US are contrasted. Estimates of the spillovers from US fiscal policy to Europe are estimated. They are found to be significant but economically modest. Consequences for debt and debt sustainability in the long-run are also examined. Concerns over debt sustainability in the EU and the US are warranted. Observers advocating much higher debt levels need to consider lessons from history. This paper was provided by the ...