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Covid crisis : impacts and responses

Context

We are experiencing with the Covid-19 pandemic an unprecedented crisis, pushing the global economy into the worst recession since the Great Depression, accelerating economic disparities across the EU and increasing the debt burden in some Member States which was already concerning before the crisis.

Governments, Central Banks and supervisory authorities have responded boldly decisively and imaginatively to limit the consequences of simultaneous sudden stops in spending, economic activity, funding and financial market functioning. There has been unprecedented coordination between monetary, fiscal and prudential policies.

Fiscal deficits and government debt have surged; central bank’ policy rates have fallen further, and their balance sheets have soared. Prudential policy has encouraged banks to partly draw the capital buffers accumulated since the Global Financial Crisis in order to keep credit flowing. So far, this concerted response seems to have worked. Financial markets have stabilized and credit has kept flowing. But the evolution of the pandemic remains uncertain and challenges remain.

At the EU level, EU policymakers reacted swiftly with an array of different policy actions that were designed to help the most affected countries. Finance Ministers decided in April 2020 on a first support package which amounts to 540 billion. A second policy package was agreed in July 2020: the €750 billion “Next Generation EU” recovery fund that will boost the normal EU budget.

Ensuring the implementation and efficient use of unprecedented amounts of money available are essential to help EU countries to rebuild after the COVID-19 pandemic and support investment in the green and digital transitions.

Nevertheless, much remains to be done at the national level to boost investment and growth. Designing and implementing an ambitious reform agenda remains an urgent priority for EU Member States. The period of “free money” will not be permanent and they need to prepare to fiscal consolidation and implement it as soon as economic conditions allow.

Contributions to the policy debate

Extracted from the main Eurofi publications (Regulatory Updates, Views Magazines and Conference Summaries)

Public and private
sector views

Europe’s economy: building back strength, moving forward for the future - February 2022 new

V. Dombrovskis - Executive Vice President, European Commission

The challenge of the public and private investment in the EU - February 2022 new

I. Tinagli - Chair of the Committee on Economic and Monetary Affairs - European Parliament

Post-Covid priorities - February 2022 new

Villeroy de Galhau - Banque de France | Nadia Calviño - Ministry for Economy and Digitalization, Spain | Klaas Knot - De Nederlandsche Bank & Financial Stability Board | Mário Centeno - Banco de Portugal | Vitorio Grilli - J.P. Morgan | Luigi Federico Signorini - Banca d’Italia

Relaunching productive investment in the EU - February 2022 new

Werner Hoyer - European Investment Bank | Odile Renaud-Basso - European Bank for Reconstruction and Development | Harald Waiglein - Federal Ministry of Finance, Austria | Philippe Heim - La Banque Postale | Alfred Kammer - International Monetary Fund

Implementing the EU recovery package - September 2021

Gert Jan Koopman - European Commission | Jean Lemierre - BNP Paribas | Emmanuel Moulin - Ministry of the Economy, Finance and the Recovery Plan, France | Harald Waiglein - Federal Ministry of Finance, Austria | Alessandro Rivera - Ministry of Economy and Finance, Italy | Irene Tinagli - European Parliament | Vitorio Grilli - J.P. Morgan | Werner Hoyer - European Investment Bank | Pierre Heilbronn - European Bank for Reconstruction and Development

Exit from Covid measures: impacts on the EU banking sector - September 2021

Rolf Strauch - European Stability Mechanism | Francesco Mazzaferro - ESRB Secretariat | Steven Maijoor - De Nederlandsche Bank | Lorenzo Bini Smaghi - Société Générale | Christian Castro - CaixaBank | Mark Geisler - Bank of China (Luxembourg) S.A.

Views on the responses to the Covid-19 crisis - April 2021

J. de Larosière - Former President, Eurofi

Post-Covid economic and financial priorities - April 2021

Klaus Regling - European Stability Mechanism | Andrej Sircelj - Ministry of Finance, Slovenia | Werner Hoyer - European Investment Bank | Pablo Hernández de Cos - Banco de España

EU Recovery Package implementation - April 2021

Harald Waiglein - Federal Ministry of Finance, Austria | Emmanuel Moulin - Ministry of the Economy, Finance and the Recovery Plan, France | Jörg Kukies - Federal Ministry of Finance, Germany | Gert-Jan Koopman - European Commission | Irene Tinagli - European Parliament | Ricardo Mourinho Felix - European Investment Bank | Vittorio Grilli - J.P. Morgan

Fostering more investment in the EU - April 2021

Markus Ferber - European Parliament | Declan Costello - European Commission | Boris Vujčić - Croatian National Bank | Mārtiņš Kazāks - Bank of Latvia | Pierre Heilbronn - European Bank for Reconstruction and Development | Laurent Zylberberg - Caisse des Dépôts | Sylvain Broyer - S&P Global Ratings Europe Ltd. | Cyril Roux - Groupama

Together for Europe’s recovery - September 2020

O. Scholz - Federal Minister of Finance and Vice Chancellor, Germany