Fiscal policy measures in response to the health crisis in the main euro area economies, the United States and the United Kingdom

Lucía Cuadro-Sáez (), Fernando S. López-Vicente (), Susana Parraga Rodriguez and Francesca Viani
Additional contact information
Lucía Cuadro-Sáez: Banco de España
Fernando S. López-Vicente: Banco de España
Authors registered in the RePEc Author Service: Lucía Cuadro Sáez and Fernando Salvador López Vicente

No 2019, Occasional Papers from Banco de España

Abstract: The epidemiological crisis caused by the COVID-19 pandemic has prompted an unprecedented shock. The containment measures adopted by the authorities have involved the temporary shutdown of many productive activities and the general confinement of the population. These events motivated the implementation of extraordinary fiscal policy measures aimed at strengthening the health system and alleviating the adverse effects of the pandemic on the economy, and supporting economic activity in the subsequent recovery phase. This paper provides a descriptive and comparative analysis of the measures adopted in some of the main advanced Western economies (Germany, France, Italy, Spain, the United Kingdom and the United States). The objective is to have a structured view of the similarities and differences in national responses to the health crisis in the area of fiscal policy. To this end, the authors describe the budgetary and “extra-budgetary” (without an immediate direct budgetary cost, such as public guarantees) measures adopted according to their objective and functionality (health spending, support for firms’ liquidity and solvency, employment protection and support for households), their instrumentation and, to a lesser extent, their size. The analysis shows the presence of high cross-country heterogeneity in terms of the amount of the support packages, although not so much in the types of measures adopted. From the analysis, two messages should be highlighted. First, regarding budgetary measures, the countries’ greater commitment to subsidies and direct transfers to firms and households stands out, compared to other more indirect income support alternatives. Second, in relation to extra-budgetary measures, the main novelty of this crisis compared to previous ones is the prominence given to public guarantee programmes for the provision of liquidity to companies. These are generally implemented through public development banks, compared to other support mechanisms managed, for example, by central banks in collaboration with National Treasuries. Finally, during the recovery phase, public support is focusing on sustaining households’ income and firms’ liquidity – extending, in some cases, the temporary measures previously adopted – while stabilising the economy, supporting the solvency of strategic sectors and encouraging business investment.

Keywords: health crisis; fiscal policy; State aid; grants; public loan guarantees; short-time work schemes (search for similar items in EconPapers)
JEL-codes: E62 E65 H00 H81 J08 (search for similar items in EconPapers)
Pages: 43 pages
Date: 2020-08
New Economics Papers: this item is included in nep-mac
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (8)

Downloads: (external link)
https://www.bde.es/f/webbde/SES/Secciones/Publicac ... 20/Files/do2019e.pdf First version, August 2020
https://www.bde.es/f/webbde/SES/Secciones/Publicac ... s/20/Fich/do2019.pdf Spanish version (application/pdf)

Related works:
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:bde:opaper:2019e

Access Statistics for this paper

More papers in Occasional Papers from Banco de España Contact information at EDIRC.
Bibliographic data for series maintained by Ángel Rodríguez. Electronic Dissemination of Information Unit. Research Department. Banco de España ().