Automatic fiscal stabilisers refer to elements, built into government revenues and expenditures, that reduce fluctuations in economic activity without the need for discretionary government actions. In addition to these discretionary measures, automatic fiscal stabilisers in the euro area countries play an important role in cushioning the economic shock caused by the pandemic. When implemented, the EU budget will temporarily almost double in size to around 2% of GDP. Furthermore, leaders at the European level have agreed on a major recovery plan embedded in the EU budget. As of end-May 2020, the discretionary fiscal measures by themselves amounted to about 3.25% of GDP at the aggregate euro area level. At the same time, euro area governments implemented sizeable packages of fiscal measures, consisting, in particular, of discretionary fiscal stimulus measures. The ECB committed to using the full potential of the monetary policy tools at its disposal within its mandate. 1 IntroductionĪuthorities in the euro area have taken exceptional policy action to stem the economic fallout from the coronavirus (COVID-19) pandemic. ![]() ![]() ![]() Published as part of the ECB Economic Bulletin, Issue 6/2020. Prepared by Othman Bouabdallah, Cristina Checherita-Westphal, Maximilian Freier, Carolin Nerlich and Kamila Sławińska Automatic fiscal stabilisers in the euro area and the COVID-19 crisis
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