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Covid crisis : impacts and responses


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

Public authority views

V. Dombrovskis - European Commission - A stronger Europe post COVID-19: economic and financial policy aspects - September 2020

J. Fernández Álvarez - European Parliament - Paving the final way for a historic EU response to the COVID-19 crisis - September 2020

R. Gualteri - Minister of Economy and Finance, Italy - An opportunity Europe must not miss - September 2020

P. Heilbronn - European Bank for Reconstruction and Development (EBRD) - We are all in this together - September 2020

J. Kukies - Federal Ministry of Finance, Germany - Enabling the financial sector to contribute to the economic recovery in Europe - September 2020

M. Nava - European Commission - Technical Support, DG REFORM and the recovery and resilience of EU Member States - September 2020

C. Noyer - Banque de France - Public debts held by central banks: what are the consequences? - September 2020

O. Renaud-Basso - French Ministry of Economy and Finance - The European recovery plan to pave the way to a stronger, more sovereign and independent Europe - September 2020

O. Scholz - German Minister of Finance - Together for Europe’s recovery - September 2020

R. Strauch - European Stability Mechanism (ESM) - Addressing post-Covid invesment needs - September 2020

I. Tinagli - European Parliament - The Recovery Package and the new priorities for the European Union - September 2020

T. Westphal - Federal Ministry of Finance, Germany - Beyond the crisis – Conditions for the relaunch - September 2020