Europe Insights - April 2021
- The European Union joint recovery fund, dubbed NextGeneration EU, is expected to start deploying grants in the second half of the year.
- Before this can commence, the NGEU needs to go through a series of approvals. This political and administrative marathon may delay funding deployment.
- The overall EU fiscal stimulus has been more limited than in the US, amplifying a transatlantic economic divergence.
- The NGEU is, however, not designed as an immediate fiscal response to the pandemic crisis to boost consumption. Its objective is to enhance production capacities – that is, the supply-side of the economy.
- The focus on potential growth is key in addressing fiscal sustainability, and ultimately, the credit ratings of the more vulnerable EU economies. Italy and Spain are entitled to receive grants of between four and seven per cent of their GDPs, and even more for Greece and Croatia (around ten per cent of output).