Economic growth as the ultimate constraint: EU fiscal policies in 2020
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In 2020, EU member states launched massive fiscal measures to mitigate the economic and social fallout of the Covid pandemic. The activation of the severe economic downturn clause of the Stability and Growth Pact, coupled with a decisive intervention of the ECB, offered member states the flexibility to stage their fiscal response. As this column reveals, however, a closer look through the lens of an expenditure benchmark highlights important cross-country differences reflecting deeper issues. Countries with very high debt and/or high sustainability risks are bound by their meagre growth prospects. If unaddressed, future reviews of the EU fiscal rules may buy time, but not solve the underlying issues.
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