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Fiscal space in the euro area before Covid-19

Author

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  • Jerome Creel

    (OFCE Sciences Po and ESCP Business School)

Abstract

Numerical simulations of fiscal space in the euro area, based on 12 different situations, point to the large uncertainty surrounding the capacity of Member States to pay back their public debts. Unless nominal long term interest rates remain low and economic growth resumes at its pre-Covid-19 median, most countries will fail to address debt sustainability. Although the analytics behind this exercise is common knowledge among macroeconomists, it gives an order of the magnitude of fiscal space in the euro area and it also confirms that interactions between the ECB and governments are key to escape the public finances consequences of an exogenous global shock like Covid-19.

Suggested Citation

  • Jerome Creel, 2020. "Fiscal space in the euro area before Covid-19," Economics Bulletin, AccessEcon, vol. 40(2), pages 1698-1706.
    • Handle: RePEc:ebl:ecbull:eb-20-00464
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    References listed on IDEAS

    as
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    More about this item

    Keywords

    Fiscal policy; public debt; fiscal deficit; Covid-19;
    All these keywords.

    JEL classification:

    • E6 - Macroeconomics and Monetary Economics - - Macroeconomic Policy, Macroeconomic Aspects of Public Finance, and General Outlook
    • H6 - Public Economics - - National Budget, Deficit, and Debt

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