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EVOLUTION OF PUBLIC DEBT IN EUROPEAN UNION AND MECHANISMS FOR FINANCING IT DURING COVID-19 PANDEMIC

Ada-Cristina Albu

Euroinfo, 2021, vol. 5, issue 1, 109-117

Abstract: The alarming increase in public debt in the Member States of the European Union as a result of the Covid-19 pandemic requires the identification of additional sources of budgetary financing to ensure the sustainability of public debt in the medium and long term. The expansionary fiscal measures adopted by the governments of the EU Member States have helped to support the economy during the lockdown period, but at the same time have led to an unprecedented rise in public indebtedness. Although the European Commission has acted through several types of measures since the beginning of the pandemic to support Member States, including derogations from the provisions of the Stability and Growth Pact in 2020, allowing countries to borrow to ensure the continuity of economic activity, however new sources of public debt financing will have to be identified in order to reduce high debt. In this respect, debt mutualisation is one of the most popular options at present, although there is still no consensus among Member States on the implementation of this mechanism.

Keywords: fiscal policy; public debt; Covid-19 crisis; debt mutualisation (search for similar items in EconPapers)
JEL-codes: E62 H63 H68 (search for similar items in EconPapers)
Date: 2021
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