The EU Independent Fiscal Institutions Network (EU IFIs) has published a special edition of the European Fiscal Monitor on its website. The report brings together and enables comparison between the fiscal measures adopted by 25 EU member countries and the United Kingdom in response to the COVID-19 crisis. This first report reflects the situation at the end of March; future updates will follow.
In this special report, the Independent Fiscal Institutions Network explains that the pandemic is significantly affecting all European economies. In fact according to its initial estimates, the crisis could impact budgetary balances by between 2.4% and 5.2% in 2020. However, there are still IFIs that have not been able to quantify the impact and some countries have already recognised that the impact could be four times higher if lockdown measures remain in place until the end of the year.
All countries have implemented some kind of fiscal stimulus to limit the impact of COVID-19, although not all have the same capacity to do so due to increased levels of structural deficit and public debt. More specifically, the 26 economies covered by the IFIs have launched over 200 fiscal measures to handle the pandemic.
The European Fiscal Monitor maintains that the magnitude of the fiscal response is unprecedented. With the information currently available, the majority of countries have increased expenditure by 1.6% GDP and provided tax relief of 1.4% GDP. This relates to direct temporary tax measures (up to one year) that will likely be extended if they prove insufficient. In addition, some countries such as Austria, France, the Netherlands and Spain have applied open programmes whose size remains to be seen. Indirect measures through credit facilities and provision of guarantees have been applied in addition to the aforementioned measures.
Furthermore, the report covers the impact of the COVID-19 crisis on Independent Fiscal Institutions’ activity, which have had to postpone or even cancel reports that they were due to publish during this period and provide resources for the analysis and calculation of the impact of the crisis and the measures taken by Governments.
In fact, many Fiscal Institutions that are part of the Network are cooperating with national authorities and governments to design sustainable strategies for fiscal policies that contribute to economic recovery.