Economic policies against crisis in Germany, Spain and France. Report

Economic policies against crisis in Germany, Spain and France. Report

The focus contained in the Bank of Italy's annual report on the main emergency measures adopted in Germany, France and Spain following the Covid-19 epidemic

The main emergency measures adopted in Germany, France and Spain following the Covid-19 epidemic were aimed at strengthening national health services, supporting the income of workers and families and alleviating the liquidity problems of businesses. Overall, these measures, largely intended for higher expenses, would increase the general government net debt in 2020 by more than 4.5 percent of the product in Germany, almost 2 in France and more than 3 in Spain (4.5 percent in Italy). Governments have also strengthened the system of public guarantees on credit to the economy with interventions which, in relation to GDP, amount to around 25 per cent in Germany, 14 per cent in France and more than 9 per cent in Spain (over 30 per cent one hundred in Italy).


Parliament approved an increase in the federal deficit for 2020 of over 150 billion, of which about 30 billion due to lower revenues. These interventions, together with the macroeconomic worsening, would bring the deficit for this year to around seven percentage points of the product, against a surplus of almost one point estimated in the autumn. The main measures envisage: (a) higher costs for the management of the pandemic, including those relating to health care (55 billion); (b) one-off transfers to small entrepreneurs and self-employed workers with a maximum individual amount of € 15,000 (€ 50 billion); (c) a strengthening of unemployment benefits and a contribution to housing and heating costs (overall 7.5 billion); (d) higher expenses for the development of a vaccine and for the purchase of personal protective equipment (3.5 billion). The public guarantees (over 800 billion) 3 granted by the Länder (63 billion) and by the federal government through the guarantee banks, the promotional development bank Kreditanstalt für Wiederaufbau (over 350 billion) and the new Economic Stabilization Fund (400 billion). The latter was also established to finance equity investment programs (up to 100 billion) and loans (up to 100 billion).


The French Parliament has approved measures that increase net debt by 42 billion. In light of the macroeconomic deterioration and the measures taken, the government estimate for the current year's deficit is 9 percent of GDP (compared to around 2 percent estimated in the autumn). The main measures envisage: (a) a wage supplement scheme for employees in the event of a reduction in working hours, with total coverage for wages up to 4.5 times the minimum (24 billion); (b) higher expenses in the health sector for the purchase of material and for the remuneration of personnel (8 billion); (c) the establishment of the Fonds de solidarité for aid of at least 1,500 euros for micro-enterprises and self-employed workers who have suffered a loss of at least 50 percent of turnover (7 billion). Furthermore, the appropriations for state financial holdings in some strategic companies (20 billion) have been increased and the Fonds de développement économique et social for the granting of loans to companies in difficulty (one billion) has been increased. Finally, the French government has set up three public guarantee schemes: two of these involve the promotional development bank BPIFRANCE and concern commercial loans and credit lines for companies with a maximum of 5,000 employees respectively; the third concerns new loans granted to all types of companies. Overall, these schemes make 300 billion public guarantees available on loans granted to businesses.


As a result of the measures taken and the sharp contraction in GDP, the government estimates that net debt for the current year slightly exceeds ten percentage points of the product (from around two percentage points last fall). The measures passed increase net debt by around 35 billion and are mainly aimed at: (a) supporting workers' income (around 23 billion), largely by resorting to the enhancement of wage integration tools; (b) increase the resources available to the health system (over 4 billion); (c) to strengthen assistance for the most vulnerable families (1.1 billion), including by providing subsidies for the payment of rents and mortgages. Discretionary measures led to a drop in revenues of approximately 6 billion, also through greater flexibility in tax compliance and tax relief. The public guarantees introduced amount to a total of around 105 billion, of which 100 relating to loans granted by financial institutions to small and medium-sized enterprises and self-employed workers.

This is a machine translation from Italian language of a post published on Start Magazine at the URL on Sun, 14 Jun 2020 16:00:22 +0000.